AM Best has reported net income in the United States life/annuity industry dropped by approximately 18% to below $28 billion in the first nine months of 2019, compared with the same prior-year period, as net realized capital losses declined.
The rating firm produce its latest Best’s Special Report, titled, “First Look – 9-Month 2019 Life/Annuity Financial Results,” using data derived from companies’ nine-month 2019 interim statutory statements, representing an estimated 95% of total industry premiums and annuity considerations.
According to the report, a $56.9 billion increase in premiums and annuity considerations was countered by a $41.1 billion decline in other income, resulting in a slight 2.3% total income increase for the life/annuity industry to $660.6 billion for the nine-month period.
These swings were “largely the result of modified coinsurance agreements and the recapture of retrocessions from foreign affiliates at American General Life Insurance Company, United States Life Insurance in the City of New York, Delaware Life Insurance Company and Hannover Life Reassurance Company of America,” it added.
Total expenses increased 4.3% from the same period of 2018, and with that increase outpacing the increase in nine-month total income, the industry’s pre-tax operating gain declined 26.1% from the prior year to $31.9 billion. Despite the decline in net income, the segment’s capital and surplus grew 7.0% from the end of 2018 to $425.2 billion.
The decline in the industry’s bond positions continued during the first nine months of 2019. Mortgage loans, which have grown steadily over the last five nine-month year-to-date periods, are up 42% from the first nine months of 2015 and now constitute 12.8% of total invested assets.