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A stronger impetus toward new ventures has come from the insurers' feeling that their loans were helping other businessmen to grow wealthy while the insurance companies took most of the risk. As a result, insurers are no longer content merely to lend money for the construction of apartments, shopping centers and other structures, and collect a fixed-interest return. They demand a share in the ownership and management, and a large slice of the profits.
Aetna Life and Casualty Co., for example, has formed a fifty-fifty partnership with Kaiser Industries to develop more than 90,000 acres of potential residential and industrial tracts in California and Hawaii that company officials figure are worth about $175 million. INA has also bought 25% of a chain of Eastern nursing homes. "We aren't interested in financing businesses of this kind," explains" President John Gurash. "We are interested in being in those businesses."
Despite such aggressive talk, diversification by insurance companies has been quite cautious so far. With the possible exception of INA's acquisition of World Airways, all the moves have been into industries that are closely related to insurance, or that insurance executives have come to know intimately through their lending or policy-writing activities.
Even though they disclaim any thoughts of setting up a new class of conglomerates, insurers have so much cash to invest that their new tactics can have an enormous effect on the economy. Last year, life insurance companies alone had over $17 billion of new money to invest, or almost 14% of gross private investment. To investors who have been accustomed to getting only an interest return on loans, says Washington Economist Miles Colean, "an exposure to equities is like the taste of blood to a young lion." The insurance industry's new look may have an even greater impact on the stock market. If insurers could sell mutual-fund shares to all their 132 million policyholders, they might well generate a torrent of cash. The thought of how much that could lift stock prices is enough to elate some Wall Streeters. The prospect frightens many others. They fear that prices could be driven beyond all relation to underlying values, and reach levels that could not be sustained.