The U.S. life/annuity market recorded net income of $18.5 billion in the first-half 2017, compared with a $2.6 billion net loss for the same period in 2016. Results that A.M. Best says were significantly impacted by the effects of large reinsurance agreements over the last two years.
Global ratings agency A.M. Best has revealed that the U.S. life/annuity industry in the first six months of 2017 has recorded a substantial improvement in net income when compared with the same period in 2016, in a recent A.M. Best special report that examines the sector.
The huge jump in net income is a result of a $45 billion decline in total expenses and taxes, as well as a $1.2 billion improvement in realized capital losses.
Capital and surplus also increased for the industry during the six month period, growing by $12.2 billion since the beginning of 2017 to a record high of $365.6 billion, as of the end of June, 2017.
The improvement in net income, combined with a 15.2% reduction in stockholder dividends, also helped to offset declines in unrealized gains and contributed capital, says A.M. Best.
“These results were significantly impacted by the effects of large reinsurance agreements undertaken in 2016 and 2017,” explains A.M. Best.
While net income climbed, total income actually fell for the sector during the period. Declining by 7% to $348.9 billion. This decline of 7%, says A.M. Best, was further exacerbated by a steep 40% dip in commissions and expense allowances on reinsurance ceded, which was again a result of the large reinsurance agreements seen through 2016 and 2017.
Despite other income increasing by 24% for the group of U.S. life/annuity players in the first-half of 2017, this wasn’t sufficient to offset the decline in total income, says A.M. Best.
But despite the decline in total income, the reduced expense allowance helped pre-tax net operating profits jump 350% on the same period in 2016, to $25.3 billion.
