Credit rating agency Moody’s reports that publicly traded US life insurers delivered solid, though uneven, operating profitability in the fourth quarter of 2025, as the boost from higher interest rates subsided and yields stabilised.
While results were generally positive compared with the prior year, sequential performance for some companies weakened due to narrower spreads in certain annuity products and increased claims in specific lines. Earnings remained supported by retirement solutions, asset management, and other capital-light operations.
Insurers continue to benefit from reinvestment yields exceeding those of legacy portfolios, although the additional lift from rising rates has largely faded. Mortality experience has returned to more typical levels, while results for disability and group benefits displayed greater variation.
Moody’s expects earnings across the sector to remain broadly steady in 2026, driven increasingly by shifts in product mix, capital management, and cost control.
Aggregate operating income among Moody’s-rated insurers fell 14% sequentially but rose 7% year on year. The decline reflects normalised interest rates, tighter spreads on select annuities, and more typical benefit experience. Equity markets and reinvestment returns continued to underpin results, while pension risk transfer activity and retirement-oriented products helped offset weaker outcomes in interest-sensitive or capital-intensive lines.
Investment income was stable quarter-on-quarter and modestly higher than in the same period in 2024. Alternative asset performance varied, with private credit performing well while commercial real estate, particularly office holdings, lagged. Capital deployment slowed as insurers focused on balance sheet efficiency, reinsurance, and capital-light growth, all while sustaining strong free cash flow and disciplined shareholder distributions.
US equity markets delivered strong gains during 2025, with the S&P 500 reaching near record highs and volatility remaining moderate, according to Moody’s. Insurers with significant asset management businesses, such as Equitable Holdings, Inc., Principal Financial Group, Inc., Ameriprise Financial, Inc., and Voya Financial, Inc., benefited from higher assets under management, positive net inflows, and elevated performance fees.
By the end of 2025, the US 10-year Treasury yield remained in the mid-4% range. Moody’s expects it to remain within 4%–5% in 2026 as the yield curve normalises and monetary easing proceeds gradually. While higher rates continue to support spread-based products and investment income, they also present disintermediation risk, particularly for interest-sensitive liabilities. Insurers have mitigated this through portfolio diversification, liability management, and a pivot toward less rate-sensitive offerings.
Foreign exchange movements influenced earnings for insurers with significant international operations. The US dollar weakened against major currencies through 2025 before stabilising, with Japanese yen movements particularly notable. Moody’s highlights that FX remains a source of quarterly volatility for insurers such as MetLife, Inc., Aflac Incorporated, and Prudential Financial, Inc., though hedging programmes and diversified exposures help manage these effects.
Pension risk transfer activity was strong in the quarter, with high demand from plan sponsors seeking to de-risk liabilities. Principal Financial Group, Inc. reported substantial deal flow, while MetLife, Inc. executed large US and UK transfers. Corebridge Financial, Inc. also noted growth in institutional reserves from PRT and guaranteed investment contracts, a trend Moody’s expects to continue into 2026.
Net income across Moody’s-rated insurers reached $8.3 billion in Q4, up from the previous quarter but below Q4 2024 levels. Earnings were primarily driven by strong investment income, with higher yields and equity market performance offsetting mixed underwriting results. Alternative investments contributed positively in several cases, although commercial real estate exposures remain a concern.
Individual life insurance sales were subdued, declining both sequentially and year on year, though results varied among companies. Globe Life, Inc. reported growth in premiums aided by expanding agent networks, whereas Primerica, Inc. experienced weaker sales due to affordability pressures. Lincoln National Corporation benefited from improved mortality and alternative investment returns despite softer volumes.
Annuities saw growth concentrated in products offering market-linked upside with downside protection, particularly registered index-linked annuities (RILAs) and fixed indexed annuities. Companies including Prudential Financial, Inc., Corebridge Financial, Inc., and Lincoln National Corporation emphasised a shift toward capital-efficient, lower-sensitivity offerings. Industry estimates cited by Moody’s show total annuity sales up year on year, with indexed products gaining market share.
Shareholders’ equity remained largely stable sequentially and up from a year earlier, supported by earnings and ongoing balance sheet optimisation. Moody’s highlights that many insurers continued divesting interest-sensitive blocks, reinsuring legacy portfolios, and expanding capital-light businesses to enhance flexibility and predictability. Shareholder returns via dividends and buybacks remained disciplined, broadly consistent with prior years.
Japan remained an important but volatile market. Aflac Incorporated experienced modest premium declines but improved benefit ratios, while Prudential Financial, Inc. faced operational disruption and a temporary suspension of new sales, with an expected impact on 2026 earnings. MetLife, Inc. saw relatively stable results from Asia overall.
Artificial intelligence was increasingly applied to improve operational efficiency, particularly in underwriting, claims, and customer service, rather than as a primary growth driver. Companies including Voya Financial, Inc., Aflac Incorporated, and Primerica, Inc. accelerated AI adoption for cost and workflow optimisation. Technology exposure in investment portfolios remains limited and diversified.
In conclusion, Moody’s assesses that while the one-off benefit from rising rates has dissipated, US life insurers enter 2026 with broadly stable earnings prospects. Profitability will increasingly depend on careful product positioning, disciplined capital management, and responsiveness to evolving economic, market, and competitive conditions.
