According to a new AM Best report, publicly traded U.S life/annuity insurance companies saw a strong recovery in 2021, with a $35 billion increase in revenue to $297.5 billion.
This recovery took place coming on the back of a modest increase in premiums as well as increases in net investment income and realised gains.
The report also stated that the industry witnessed a net income which more than tripled to $32.5 billion in 2021 from the previous year, which was driven largely by a 13% boost in revenue.
Companies continue to perform fairly well despite volatility in mortality from COVID-19 and still consider COVID-19 mortality as having an earnings impact, instead of a balance sheet impact, which suggests no significant changes to reserves.
AM Best said that most carriers continue to experience higher mortality rates than usual; in 2021, mortality was higher for working-age populations, which affected individual and group life claims.
Meanwhile, net investment income rose by roughly $11.9 billion to $85.7 billion, with MetLife contributing the most with its net investment income rising to $21.4 billion, from $17.1 billion in 2020.
Another leader in investment income was Athene, who rose to $7.2 billion in 2021 from $4.9 billion, which was driven by a reinsurance transaction with Jackson National, strong investment performance, and an increase in Athene’s investment in Apollo.
In addition, the persistent drag from the low interest rate environment continues to impact margins, but ongoing growth in general account invested assets, aided by premium growth and assets under management, has pushed investment income higher.
The report further notes that of the 17 publicly traded companies in the analysis, 13 experienced a decline in capital, amounting to an overall 5% decrease.
Share buypacks, which were halted during the pandemic, resumed in 2021 as the segment purchased 92.9% more shares, driven largely by MetLife and Prudential.
But, the return of share repurchases, as a well as a modest increase in dividends paid, contributed to the decline in capital. Ten of the publicly traded life/annuity companies saw a decline in equity, which can be largely attributed to a drop in accumulated other comprehensive income, specifically an increase in unrealised losses. The largest decreases were at MetLife, with 40.0%, and Prudential with 30.6%.
At $85.7 billion, total debt remained roughly the same as it did in 2020, with both MetLife and Prudential seeing decreases of over $2 billion each. Long-term debt declined by 1% to $82.0 billion, while short-term debt grew by 25.0% to $3.7 billion.
AM Best stated that most of the companies that have been able to take advantage of the low interest rate environment and issue long-term debt have already done so, either to fund business growth or for upcoming maturities.
Furthermore, investors continue to shift to indexed products from fixed-rate ones to seek protection from rising inflation.
Traditional variable annuities also experienced very strong growth, which was bolstered by favourable equity markets, while glistered indexed-linked annuities continued the rapid growth of prior years.
