27 November 2019

US life/annuity insurers’ net income fell by 18 percent in 9-month 2019 period

Net income in the US life/annuity industry dropped by approximately 18 percent to $27.6 billion in the first nine months of 2019, compared with the same prior-year period, as net realized capital losses declined $4.9 billion.

This is according to a new report from global credit rating agency AM Best. The Best’s Special Report, titled First Look – 9-Month 2019 Life/Annuity Financial Results, uses data from companies’ nine-month 2019 interim statutory statements that were received as of November 20, 2019, representing an estimated 95 percent of total industry premiums and annuity considerations.

According to the report, a $56.9 billion increase in premiums and annuity considerations was countered by a $41.1 billion decline in other income, resulting in a slight 2.3 percent total income increase for the life/annuity industry to $660.6 billion for the nine-month period.

These swings were largely the result of modified coinsurance agreements and the recapture of retrocessions from foreign affiliates at American General Life Insurance Company, United States Life Insurance in the City of New York, Delaware Life Insurance Company and Hannover Life Reassurance Company of America.

Total expenses increased 4.3 percent from the same prior-year period, and with that increase outpacing the increase in nine-month total income, the industry’s pre-tax operating gain declined 26.1 percent from the prior year to $31.9 billion.

Despite the decline in net income, the segment’s capital and surplus grew 7.0 percent from the end of 2018 to $425.2 billion.

The decline in the industry’s bond positions continued during the first nine months of 2019. Mortgage loans, which have grown steadily over the last five nine-month year-to-date periods, are up 42 percent from the first nine months of 2015 and now constitute 12.8 percent of total invested assets.

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