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Best’s Market Segment Report: US Life/Annuity Insurers Stay the Course, Prepare for 2024 Uncertainty

The U.S. life/annuity insurance segment remains well-capitalized after a nominal 1.6% increase in statutory capital and surplus through Sept. 30, 2023, from year-end 2022, and steady net income. However, according to AM Best’s annual Review & Preview report on the industry segment, uncertainty and volatility in financial markets, risks contained within certain asset classes and remaining legacy liabilities are lingering concerns for 2024.

The Best’s Market Segment Report, titled, “US Life/Annuity Insurers Stay the Course as They Prepare for 2024 Uncertainty,” states that the rising interest rate environment has affected assets and liabilities, but the overall realized impact to balance sheets has been manageable, owing primarily to companies’ strong asset-liability management frameworks. Over the near term, most insurers plan to hold assets to maturity, driving unrealized losses, but they unlikely will be forced to sell to meet liquidity needs. AM Best estimates modest 4% growth in the industry’s capital and surplus for 2023 and expects net income to approach pre-pandemic levels in 2023 and continue growing in 2024.

“With inflationary pressures expected to subside in 2024, the industry has more consensus about the investment landscape but with similar levels of uncertainty as in 2023,” said Michael Porcelli, senior director, AM Best. “Shifts in asset composition has helped insurers mitigate the impacts of rising interest rates while minimizing cash flow volatility; however, these asset allocations cannot completely mitigate all risk, as evidenced by the material decline in the market value of invested assets on insurers’ balance sheets over the past two years.”

According to the report, the industry’s net income of $31.6 billion through third-quarter 2023 was unchanged compared with the same prior-year period. For most companies, COVID-19 mortality had affected earnings, as opposed to balance sheets, suggesting no significant impact on reserves or capital, but the overall impact has declined since early 2022. The longer-term implications of COVID-19 and other mortality factors on liabilities and future pricing assumptions are still uncertain, with most companies not yet making significant changes to their mortality assumptions.

The report also discusses the rising number of private equity- and asset manager-owned insurers, which now represent nearly 10% of the total life/annuity industry by admitted assets. Despite the rapid growth in premiums, operating results for these types of organization structures have largely followed the greater industry, and returns on equity have mirrored those of stock companies, with results only minimally below those achieved by the stock entities.

The report also explores a host of other issues impacting the life/annuity industry, including sales trends, artificial intelligence and accounting changes. Overall, AM Best expects expect segment challenges to remain manageable given insurers’ robust risk-adjusted capital, favorable liquidity profiles and effective ERM practices.

“Uncertainty about the US economy and geopolitical risks could create significant headwinds in 2024, but life insurers have mostly favorable risk management practices, including the use of hedges, adjustments to crediting and discount rates, business mix re-evaluations and a focus on technology and innovation,” said Porcelli.

To access the full copy of this special report, please visit

A video discussion about this report with Porcelli is available at

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

Copyright © 2024 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.


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