Best’s Special Report: Benefits and Reserves Outpace Revenue Growth, Dampening Earnings for Publicly Traded US Life/Annuity Insurers

Total GAAP revenue of publicly traded U.S. life/annuity companies rose year over year by 2.3% in 2023 to $287.2 billion, aided by 20% growth in investment income. However, according to a new AM Best report, a higher level of benefits paid and reserve increases led to a 43% decline in net income to $18.7 billion.

The new Best’s Special Report, titled, “Benefits and Reserves Outpace Revenue Growth, Dampening Earnings for Publicly Traded US L/A Insurers,” states that the revenue increase was partially counterbalanced by declines of 7.0% in earned premium and 0.6% in fee income. Though total net premiums earned dropped, it was largely driven by large pension risk transfer deals in 2022 and new reinsurance transactions in 2023; most companies saw premium growth of more than 10%, according to the report. At the same time, all but four of the 17 publicly traded companies followed for this report saw an increase in net investment income.

After historically high sales in the prior two years, life insurance sales growth was more modest. Fixed-rate deferred annuities and fixed-indexed annuities have led the sales growth, which, coupled with the higher interest rate environment, has heightened competition, as several new private equity and asset management-backed insurers launched multiyear guaranteed annuities (MYGA) due to their attractive interest rate spreads.

“Although heightened mortality risk owing to the pandemic has been mostly manageable, the relatively newer and growing annuity product lines are subject to greater uncertainty and risk as experience may not yet be fully developed,” said Jason Hopper, associate director, industry research and analytics, AM Best.

To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=342073.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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