US Life & Annuity Insurance Market in 9M 2022 rose 7% by premiums

Total income in the US life and annuity insurance market rose 4.1% during the 2022, that was driven by a 7% increase in premiums and annuity considerations along with a 2.6% increase in net investment income.

According to AM Best Report, a $4.6bn decline in net realised capital losses contributed to the industry’s net income of $31.4bn, up 25% from the same period in 2021.

Over the same period, total expenses for the life insurance industry grew 4.2%, which was mostly due to a $38.6bn reduction in net transfers to separate accounts. Resulting pre-tax net operating gain was $42bn, up 2.5%.

Capital and surplus fell 2% to $482bn, as $46bn of net income, contributed capital, and change in asset valuation reserve were reduced by $55.3bn, consisting of a change in unrealised losses, other changes in surplus, and stockholder dividends.

Holdings in cash and short-term investments declined 3.4% from the end of 2021. Investments in mortgage loans continue to climb, increasing 6.4% from the end of 2021, with the asset class now constituting 13.2% of total invested assets.

According to Life & Annuity Insurance Industry Statistics, life insurers must prepare for the future, but uncertainties make it difficult to predict. These scenarios explore how the life insurance and annuities (L&A) industry landscape may develop over the next one to three years and helps leaders explore some of the potential medium-term implications of COVID-19.

US life insurers are heading into 2023 in solid shape, despite more volatile capital markets and higher inflation drying up issuance in recent months.

According to Fitch, throughout 2020 and 2021, insurers in the US and Canada took advantage of historically low interest rates to refinance outstanding securities, lock in relatively cheap long-term financing and shore up capital positions.

US and Canadian life insurers have only limited exposure to near-term maturity risk as rates rise, with maturities prior to 2030 estimated at below $2 bn, with an additional $10 bn maturing prior to 2040.

But, Fitch does not believe rated life insurers will face difficulty refinancing any near-term maturities, and generally have sufficient liquidity to repay upcoming maturities if capital markets become more unfavorable.

Annuities are contracts that accumulate funds or pay out a fixed or variable income stream. The income stream can be for a set period or over the lifetime of the contract holder or beneficiaries.

Accident and health insurance, which includes distinctive products apart from traditional health insurance, account for 26% of direct premiums written. In addition to annuities, accident and health, and life insurance products, life insurers may offer financial services such as asset management (see Life Insurance Industry Results).

Traditional life insurance is no longer the primary business of many companies in the life insurance industry. The emphasis has shifted to underwriting annuities, which accounted for 48% of life/annuity direct premiums written.

by Nataly Kramer