Report: Preliminary Figures Show 13% Net Income Drop For U.S. Life/Annuity Industry

OLDWICK, N.J.--(BUSINESS WIRE)-- Net income in the U.S. life/annuity industry dropped nearly 13% in first-half 2018, which along with an increase in stockholder dividend payments, drove industry capital and surplus down by 1.8% compared with the prior year end. This financial review is detailed in a new Best’s Special Report, titled, “A.M. Best First Look—First Half 2018 Life/Annuity Financial Results,” and the data is derived from companies’ six-month 2018 interim statutory statements that were received as of Aug. 21, 2018, representing an estimated 85% of total industry premiums and annuity considerations.

According to the report, the U.S. life/annuity industry recorded a $6.0 billion decline in premiums and annuity considerations during the first half of 2018, but it nearly was offset completely by a $5.9 billion increase in net investment income. In addition, pretax net operating gains for the industry declined to $24.9 billion for the first six months of 2018, down 9.5% from the prior year period. A $3.5 billion reduction in federal and foreign taxes was countered by additional net realized capital losses of $3.3 billion, resulting in total industry net income declining to $17.0 billion from $19.5 billion in the same period of 2017. Capital and surplus dropped to $371.4 billion in first-half 2018 from $378.3 billion at the start of the year.

The trend of reduced cash and bond positions in the industry continued during the first half of 2018, with further increases to mortgage loans and other invested assets. The shift is most striking in mortgage loans, which have grown steadily over the first-half periods of the last five years—up 41% from the first half of 2014—to constitute 12.4% of total invested assets in the first half of 2018.

To access a copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=277330.

A.M. Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit www.ambest.com for more information.

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Source: A.M. Best