Absolute C&S within US L/A industry grows by 5%

Written by Adam Cadle

08/03/2021

Absolute capital and surplus (C&S) within the US life/annuity (L/A) industry grew by 5% in the nine months to 30 September 2020, from the prior-year period, benefiting from positive, albeit significantly lower, earnings and a change in unrealised capital gains.

According to AM Best, net income for the L/A industry in the nine-month 2020 period fell by 55% from the same period of 2019 to $13.2bn.

Low interest rates and L/A carriers’ desire to hold more liquidity during the pandemic drove an increase in debt issuance, as companies took advantage of the opportunity to refinance older issues that had been priced at higher interest rates. Debt issuance for the L/A carriers amounted to nearly $35bn through September 2020, significantly higher than the approximately $20bn through September 2019.

A flurry of merger and acquisition announcements in early 2021 has reinforced AM Best’s expectations that the L/A segment will remain heavily focused on interest rate risk amid declining interest margins.

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