Whether measured by premium income or by assets, traditional life insurance is no longer the primary business of many companies in the life/health insurance industry. The emphasis has shifted to the underwriting of annuities. Annuities are contracts that accumulate funds and/or pay out a fixed or variable income stream. An income stream can be for a set period of time or over the lifetimes of the contract holder or his or her beneficiaries.
Nevertheless, traditional life insurance products such as universal life and term life for individuals as well as group life remain an important part of the business, as do disability income and health insurance.
Life insurers invest primarily in corporate bonds but also significantly in corporate equities. Besides annuities and life insurance products, life insurers may offer other types of financial services such as asset management.
2015 Financial Results
According to S&P Global Market Intelligence the life insurance industry posted a 7.3 percent increase in 2015 in net income after taxes despite continued low interest rates and soft equity markets that resulted in a $2.2 billion decrease in capital gains. Premiums were down 1.4 percent in 2015, compared with 2014, when premiums were at their highest level since the Great Recession. Expenses fell 4.5 percent in 2015 and net gains from operations before federal income tax rose 11.0 percent, after having fallen 22.1 percent in 2014. Capital and surplus rose to $367.4 billion in 2015 from $354.0 billion in 2014, according to S&P Global Market Intelligence.
The life/health insurance industry’s cash and invested assets totaled $3.7 trillion in 2015, according to S&P Global Market Intelligence. Almost three-quarters of these assets were invested in bonds (see page __). About 11 percent of life insurers' assets were held in real estate loans.
Life/Health Insurance Industry Income Statement, 2011-2015
($ billions, end of year)