Fueled by declines in tax obligations and realized capital lossesIn a recent special report, AM Best assess the current financial position of the life insurance industry. Access the full report here.
OLDWICK, N.J., June 10, 2022—The U.S. life/annuity (L/A) industry saw its net income increase by 60% in the first three months of 2022 compared with the same prior-year period, fueled by declines in tax obligations and realized capital losses. This financial review is detailed in a new Best’s Special Report, “First Look: Three-Month 2022 U.S. Life/Annuity Financial Results,” and the data is derived from companies’ three-month 2022 interim statutory statements that were received as of June 6, 2022, representing an estimated 91% of the total L/A industry’s net premiums written.
According to the report, the U.S. L/A total income rose 3.9% from the prior-year period, driven by a 2.7% increase in premiums and annuity considerations and an 8.6% increase in net investment income. Total expenses for the industry grew 7.8%, as increases in surrender and other benefits drove a 7.2% rise in incurred expenses. The industry’s pretax net operating gain was down by 30.4% to $15.0 billion, but the lower tax burden and a $10.2 billion decrease in net realized capital losses contributed to the industry’s net income spike to $13.4 billion, compared with $8.4 billion in first-quarter 2020.
AM Best’s First Look report provides early insight into the current financial state of the US life/annuity industry. The data in this report are from companies whose three-month 2022 interim period statutory statements we received as of June 6, 2022. These companies account for an estimated 91% of total industry premiums and annuity considerations and
97% of capital and surplus.
Total Income Up 3.9%
During the first three months of 2022, US life/annuity total income rose 3.9% from the prior year period, driven by a 2.7% increase in premiums and annuity considerations and an 8.6% increase in net investment income. Total expenses for the industry grew 7.8%, as increases in surrender and other benefits drove a 7.2% rise in incurred expenses. Resulting pretax net operating gain was $15.0 billion, down 30.4%. A $1.4 billion decrease in tax obligations and $10.2 billion decline in net realized capital losses contributed to the industry’s net income of $13.4 billion, up 60.2% from the same period in 2021.
Capital and surplus declined 1.1% from the end of 2021 to $478.9 billion, as $18.9 billion of net income, contributed capital, and change in asset valuation reserve were reduced by $24.0 billion, consisting of a change in unrealized losses, other changes in surplus, and stockholder dividends.
Holdings in cash and short-term investments declined 11.9% from the end of 2021. Investments in mortgage loans increased 2.7% from the end of 2021 and the asset class now constitutes 13.0% of total invested assets.
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