Insurance companies will take a big hit from Hurricanes Harvey and Irma, but that shouldn’t hurt North Carolina’s retirement system investments.
“We have not seen any remarkable changes in our portfolio values associated with this,” Treasurer Dale Folwell said Tuesday during his monthly Ask Me Anything teleconference with reporters.
“As far as investments are concerned, it’s generally rumor followed by news,” Folwell said. “We’re staying the course as far as the investment portfolio is, and nothing big to report.”
Reuters reported Monday insurance losses could reach $75 billion from the hurricanes that flooded Houston and a wide swath of southeast Texas in late August, and slammed Florida and other Southeastern states the past few days.
That will result in an industry loss for the year.
“Unfortunately, it’s sort of perverse that oftentimes when these kinds of tragedies hit there’s financial implications for these insurance companies,” Folwell said. In many instances insurance company stock actually rallies because investors see an opportunity based on new risk adjustments to justify price hikes.
Folwell wished those affected by the hurricanes well as they rebuild their lives and homes. That activity could affect the state’s retirement system portfolio, he said.
North Carolina owns about $800 million in timber from Washington, D.C., to Ponte Vedra Beach, Florida, “that’s been in the doldrums for about 12 years,” Folwell said. “The pension plan of North Carolina has the wood if anyone might need any.”
The Federal Reserve Board might back off anticipated interest rate changes at its meeting next week while affected states continue to assess hurricane damage and conduct relief efforts, Folwell said.
A rise in interest rates would reduce the value of the retirement system’s investment portfolio, Folwell said.
While the state is unlikely to experience major investment impacts from the hurricanes, neither has it reaped windfalls from the stock market rally since President Trump took office, Folwell said.
The Dow Jones Industrial Average is up 11.5 percent since Trump’s inauguration and strung together nine consecutive record-setting days ending Aug. 9. The S&P 500 price returns roughly mirrored that percentage increase since Trump took office.
State pension fund assets hit a record $93.9 billion at the end of the second quarter this year and earned 10.6 percent for the fiscal year ending June 30. But Folwell said that return wasn’t as good as other pension plans of equivalent size, so his Investment Management Division will be turning its focus to asset allocation over the next six months.