US L/A industry’s net income cut nearly in half in 2020

Written by Adam Cadle

23/03/2021

The US life/annuity (L/A) insurance industry saw its net income cut nearly in half in 2020, to $24bn from $45bn.

These preliminary results are detailed in a new Best’s Special Report, titled, First Look: 12 Month 2020 Life/Annuity Financial Results, and the data is derived from companies’ annual statutory statements received as of 17 March 2020, representing an estimated 98% of total industry premiums and annuity considerations.

According to the report, premiums and annuity considerations for the L/A industry declined 8.3%, as Jackson National Life entered into a coinsurance agreement with Athene Life Re and ceded $24.0bn of individual annuities to Bermuda.

Increases in the amortisation of interest maintenance reserve and other income offset the decline, and resulted in a 4.7% drop in total income, compared with the prior year. Due to the drop in income exceeding a 2.6% reduction in expenses, pretax net operating gain fell by 35.0% to $39.9bn from the prior year. Income tax expense was also down in 2020, by $4.1bn, but net realised capital losses increased by $3.9bn, resulting in the drop of total industry net income to $24.0bn.

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