Premium growth for publicly traded U.S. life/annuity (L/A) insurance companies continued to recover in 2022, but was cuffed by declines in investment and fee income that drove total GAAP revenue down by 12% to $291.5 billion, suggests a new report from AM Best.
According to the report, another contributing factor to the revenue decline was $22.9 billion in realised losses, which were reported at all but 3 of the 18 companies used in AM Best’s analysis.
The rating agency suggests that more than half of these companies saw an increase in premium revenue, while nearly all saw a drop in fee income, as declines in assets under management were more widespread.
AM Best Associate Director Jason Hopper, commented, “Many of the publicly traded life insurance companies have substantially reduced their product offerings in recent years due to the low-interest rate environment, which made achieving targeted profit margins difficult.
“Because of the COVID-19 pandemic, consumers have gravitated toward protection products such as indexed universal life.”
The report also states that amid rising interest rates in 2022, L/A insurers increased fixed annuity production and were able to invest in higher-yielding securities and offer higher crediting rates.
However, carriers began to pull back on fixed annuity sales in the latter half of 2022 to conserve capital and focus on building a more diverse product offering.
Elsewhere, AM Best’s report found that pretax operating income remained strong, up nearly 34% to $40.3 billion, with all but one company reporting positive earnings. Meanwhile, net investment income declined by roughly $11.5 billion to $78.6 billion.
The rating agency notes that overall, the publicly traded L/A companies saw a significant drop in shareholders’ equity in 2022, down nearly two-thirds, to $122 billion in 2022 from $351 billion in 2021, though this was flat when adjusted for unrealised losses.
