Growth in capital and surplus of US L/A industry projected at around $48bn

Written by Adam Cadle

11/03/2025

AM Best is projecting modest growth in capital and surplus of approximately $48bn for the US life/annuity (L/A) insurance industry over the combined 2024-2025 period, according to AM Best.

The segment’s net income in 2025 is projected to exceed pre-pandemic levels and reach an estimated $51.1bn in 2025, up from $37.9bn just two years earlier. However, the L/A segment’s return on equity levels are expected to decline by 2.5 percentage points to an estimated 8.2% during that same timeframe.

According to AM Best, the L/A industry’s balance sheets remain well-capitalised and continue to grow, as capital rose over the first three quarters of 2024, compared with year-end 2023. Last December, AM Best maintained its stable outlook on the segment, citing strong liquidity and capital positions, robust annuity sales and a prolonged benign credit environment.

“There are still some lingering concerns that include uncertainty and volatility in financial markets, risks in certain asset classes and legacy liabilities,” said Michael Porcelli, senior director, AM Best. “Overall, the equity markets performed strongly last year and credit spreads continued to shrink.”

The US L/A segment saw a slight increase of 0.8% in statutory capital and surplus through September 2024, compared to year-end 2023. Statutory net income was down 31% through the first nine months of 2024, compared with the same prior year period.

The report also noted that private equity/asset manager-owned insurers have grown in number and assets in recent years and now comprise nearly 10% of the L/A industry based on admitted assets. Based on indications, there is little expectation for this trend to slow, as owners maintain a large amount of committed capital to provide to these operating entities. “While many of these companies and their private equity/asset manager owners have been open to taking on pure life business for a more diversified mix, the annuity business has been far more common,” Porcelli said.

Despite rapid growth in premiums and balance sheets, operating results for private equity/asset manager-owned insurers have largely followed stock companies. Median returns on equity for these types of private equity/asset manager-owned insurers have mirrored those of stock companies since the beginning of more rapid growth in 2021, with results slightly below those achieved by the stock entities.

Going forward, AM Best continues to believe that the L/A segment maintains adequate liquidity as well as favourable capitalisation to mitigate any near-term volatility. Some companies could find maintaining market share a challenge, as they attempt to meet changing consumer needs. Additionally, intensifying competition in the annuity market has the potential to lead to pricing pressure and the need for further product differentiation.

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