Analysis from A.M. Best shows that total income in the U.S. life/annuity industry fell slightly in the first-half of 2019 to $422.4 billion, as a $26 billion decline in other income offset a $24.9 billion increase in premiums and annuity considerations.
A.M. Best’s analysis is derived from companies’ first-half 2019 interim statutory statements, representing roughly 95% of total industry premiums and annuity consideration.
According to the ratings agency’s report on the U.S. life/annuity sector in H1 2019, the significant swings in premiums and other income were mostly driven by Modified Coinsurance Agreements, and also the recapture of retrocessions from foreign affiliates at American General Life Insurance Company, United States Life Insurance in the City of New York, and Hannover Life Insurance Reassurance Company of America, executed in H1 2018.
During the six-month period, the industry recorded a $10.6 billion decrease in incurred benefits, which was offset by a $4.8 billion increase in operating and other expenses and a $6.7 billion reduction in net transfers to separate accounts, resulting in total expenses in H1 2019 being unchanged from the same period in 2018.
The group’s pre-tax operating gain declined 4.9% year-on-year to $25 billion. At the same time, a $1.2 billion increase in federal and foreign taxes and a $3.8 billion reduction in net realised capital losses drove a $1.4 billion increase in total industry net income, to $18.8 billion.
“The modest improvement in net income, coupled with a $14.6 billion change in unrealized gains and stockholder dividend payments $8.3 billion lower than the prior year period, boosted the industry’s capital and surplus up 4.3% from the end of 2018,” explains A.M. Best.