Life Insurance

U.S. Life/Annuity Industry Posts 60% Net Income Increase In First-Quarter 2022

Fueled by declines in tax obligations and realized capital losses

In 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.

 

 

 

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
Copyright © 2022 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

 

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