Best’s Special Report: U.S. Life/Annuity Insurers’ Net Income Cut by More Than Half in Nine-Month 2020 Period, Preliminary Results Show

·2-min read

Net income in the U.S. life/annuity industry dropped by nearly 57% to $12.7 billion in the first nine months of 2020, compared with the same prior-year period. This financial review is detailed in a new Best’s Special Report, titled, "First Look: 9-Month 2020 Life/Annuity Financial Results," and the data is derived from companies’ nine-month 2020 interim statutory statements that were received as of Nov. 23, 2020, representing an estimated 94% of total industry premiums and annuity considerations.

According to the AM Best report, total expenses increased in the first nine months of 2020, by 3.2%, as did death, annuity and other incurred benefits, which rose by 9.2%. These increases negated a 5.8% decline in surrender benefits, a 12.4% drop in general and other expenses and a decline of $13.4 billion in transfers to separate accounts. The industry’s total income remained steady, but coupled with the increase in expenses, pretax net operating earnings fell by 60.4% from the prior-year period to $13.6 billion. A decline in tax obligations and a rise in net realized capital gains mitigated the impact slightly, resulting in industry net income of $12.7 billion for the first nine months of 2020, compared with $29.4 billion in the same prior-year period.

The industry’s bond holdings as a percentage of total cash and invested assets continued to decline during the first nine months of 2020, as cash and short-term investments rose by 38.2% and other invested assets were up by 15.1% from the end of 2019.

To access a copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=303447.

AM Best is a global credit rating agency, news publisher and data provider specializing in the insurance industry. The company does business in more than 100 countries. Headquartered in Oldwick, NJ, AM Best has offices in cities around the world, including London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2020 by A.M. Best Company, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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