The life/annuity industry’s net income fell by 66% in the first half of 2020, compared with the year-ago period, A.M. Best reported today, driven by a major reinsurance agreement inked between Jackson National and Athene.
This financial review is detailed in a new Best’s Special Report, titled, “First Look— Six-Month 2020 Life/Annuity Financial Results."
Although some life insurers provided COVID-19-related premium refunds to policyholders, the primary reason for the steep premium decline was Jackson National’s ceded coinsurance agreement with Athene Life Re, the report concluded.
The deal had the effect of moving approximately $27 billion of premium out of the U.S. statutory industry population and into Bermuda.
Total expenses for the industry increased 1.1%, as a 5% decline in surrender benefits, a 13.3% decline in general and other expenses and $11.6 billion less in transfers to separate accounts offset an 11.4% increase in death benefits.
In addition, the premium decline and minimal expense increase resulted in a drop in net operating gain of 95.3% from the prior-year period, to $1.6 billion. Despite the reduction in net income and a 50% decline in unrealized gains, capital and surplus increased by 4.1% to $440.8 billion over the six-month period.
The data is derived from companies’ six-month 2020 interim statutory statements that were received as of Aug. 26, 2020, A.M. Best said, representing an estimated 98% of total industry premiums and annuity considerations.