US life/annuity insurers flex muscles in 2022

Written by Adam Cadle

14/03/2023

US life insurance and annuity writers posted a 17% increase in net income to $31.7bn through Q3 2022, as compared with the same prior year period, driven mainly by a 7% rise in premium and annuity considerations, according to AM Best.

Its latest report, ‘US Life/Annuity Insurers Well-Positioned for 2023 Challenges’, states that the life/annuity segment remains well-capitalised to face ongoing economic uncertainty. Statutory capital and surplus dropped 2.1% through the first nine months of 2022 from year-end 2021, but the report noted that most companies had bolstered their balance sheets in previous years. Unrealised losses spiked significantly to $20.1bn through Q3 2022, but in the near term and despite the capital decline, most insurers can hold those assets driving unrealised losses to maturity and will likely not be forced to sell to meet liquidity needs. AM Best said it expects full-year 2022 pre-tax operating gains to close out in a favourable position, with capital and surplus to rebound in 2023 to above 2021 levels.

“Most companies survived the worst of the pandemic with operating results moving in tandem with the ebb and flow of pandemic-related mortality claims but remaining favourable for the most part,” Michael Porcelli, senior director at AM Best, said. “Russia’s invasion of Ukraine, inflation, rising interest rates and the threat of a recession caused fluctuations in investment results over the year. However, premium growth continues as the need for protection was acutely highlighted.”

Schedule BA assets have increased over the past five years, to 9.1% of total holdings at Q3 2022 from 6.3% in 2017, as insurers have become more comfortable underwriting private asset classes and developed a greater preference for structured asset classes and mortgage assets. More-effective financial modelling capabilities in the past decade have helped asset managers to capitalise on market dislocations and improve asset performance, AM Best stated.

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