Best Market Segment Report: AM Best Revises Outlook on US Life Insurance / Annuity Industry to Stability

OLDWICK, New Jersey– (BUSINESS WIRE) –
AM Best revised its market segment outlook from negative to stable as the segment saw a number of improvements including gains in capital markets and diversified income streams that helped offset the impacts of the pandemic on mortality.

In his new Best Market Segment Report, “Market segment outlook: we Life / Annuity, ”AM Best says the revised outlook is based on record levels of funding and improving earnings. Death claims had an impact on profits, but many leading companies reported strong product sales in the second and third quarters of 2021. Additionally, credit losses on commercial mortgages and Fixed income assets were subdued and well below expectations. Insurers have also benefited from stronger risk management frameworks to shed traditional businesses in a robust transaction market.

The low interest rate environment remains, but has fueled acquisitions of old blocks of business, including variable annuities, retirement risk transfer blocks and interest rate sensitive blocks. According to the report, the current market dynamics allow a restructuring from the balance sheet to the liabilities. Insurers benefit from lower costs of capital and strong liquidity, which will position them well as the economy improves and if interest rates rise and inflation declines.

Several pre-COVID-19 pre-pandemic trends have accelerated, including the pivot of life / annuity insurers to fee-based business models that are less sensitive to movements in capital markets. Although such changes take time to fully materialize, the formation of new reinsurers, most often private equity-backed, has allowed a more rapid inflow of capital into the industry. This has also intensified the competition for the existing business books available. AM Best sees the additional capital as a positive, while also acknowledging a still developing business model that seems riskier but with higher yielding assets.

While the life annuity segment faces some hurdles as it looks to 2022, including continued COVID-19 cases and death claims, as well as inflationary headwinds, AM Best believes carriers will be able to meet these challenges due to improvements in capitalization, profitability and business risk management practices.

To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=315385.

To watch a video with AM Best Managing Director Ken frino about we outlook for the life / annuity market segment, please visit http://www.ambest.com/v.asp?v=amboutlookla1221.

AM Best senior analysts to examine the 2022 market segment outlook for the we key segments of the insurance industry and the global reinsurance industry in an online briefing intended for Thursday, December 9, 2021 To 2:00 p.m. EST. To register for the briefing, go to www.ambest.com/conferences/USMB2022.

To view the current outlook for Best’s market segment, please visit http://www.ambest.com/ratings/RatingOutlook.asp.

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

Copyright © 2021 by AM Best Rating Services, Inc. and / or its affiliates. ALL RIGHTS RESERVED.

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Source: AM Best