2019 Insurance Fact Book

Life/Annuity Sector

Traditional life insurance is no longer the primary business of many companies in the life insurance industry. The emphasis has shifted to the underwriting of annuities, which accounted for 48 percent of life/annuity direct premiums written in 2018. Annuities are contracts that accumulate funds or pay out a fixed or variable income stream. An income stream can be for a set time period or over the lifetimes of the contract holder or beneficiaries. Accident and health insurance, which includes distinctive products apart from traditional health insurance, accounts for 27 percent of direct premiums written. Traditional life insurance products such as universal life and term life for individuals, and group life, remain an important part of the business, making up the remaining 25 percent of direct premiums written. In addition to annuities, accident and health, and life insurance products, life insurers may offer other types of financial services such as asset management.

Traditional health insurance, which is not included in this section and are not considered a part of the life/annuity sector, are described under Private Health Insurance. Health insurance pays for medical, surgical and hospital services received by the insured, as well as routine and preventive care, usually within a network format. Of the many types of plans available, most include a deductible paid by the insured, and benefits received are tax-free. Accident insurance and health insurance, which is included in the life/annuity and property/casualty (P/C) sectors, encompass a variety of specialty products related to health, such as reimbursement for the time a policyholder spent in a hospital or was disabled; short- and long-term disability based on employment; long-term care, and critical or catastrophic illness insurance. Accident and health insurance are not meant to replace health insurance.

2018 Financial Results

According to S&P Global Market Intelligence, in 2018 net income after taxes for the life/annuity insurance industry fell 10.0 percent to $37.9 billion, from $42.1 billion in 2017. Net income before capital gains fell 15.8 percent in 2018 from 2017, and a net realized capital gains loss of $4.7 billion contributed to lower net income. Premiums and annuity considerations rose slightly in 2018, up 1.3 percent from 2017, as annuity premiums and deposits fell 6.1 percent. Expenses grew by 10.8 percent in 2018 following a drop in 2017. Capital and surplus rose to $400.0 billion in 2018 from $394.9 billion in 2017, according to S&P Global Market Intelligence.

Life/Annuity Insurance Income Statement, 2014-2018

($ billions, end of year)

  2014 2015 2016 2017 2018 Percent change,
2017-2018 (1)
Revenue            
     Life insurance premiums $133.9 $151.4 $115.0 $137.1 $145.4 6.0%
     Annuity premiums and deposits 352.8 324.0 318.5 287.2 269.7 -6.1
     Accident and health premiums 156.6 158.8 162.8 169.3 184.2 8.8
     Credit life and credit accident and health  premiums 1.4 1.4 1.3 1.3 1.3 4.1
     Other premiums and considerations 2.6 2.5 2.2 2.1 4.0 90.1
     Total premiums, consideration and deposits $647.3 $638.2 $599.9 $597.1 $604.6 1.3%
     Net investment income 171.7 170.8 173.0 182.3 187.4 2.8
     Reinsurance allowance -15.0 -86.4 -17.0 -25.1 32.0 NA
     Separate accounts revenue 34.3 35.2 34.7 36.6 37.3 2.0
     Other income 39.7 90.5 61.3 49.0 44.0 -10.2
     Total revenue $878.0 $848.2 $851.9 $839.8 $905.4 7.8%
Expense            
     Benefits 251.8 263.9 271.4 281.4 290.7 3.3
     Surrenders 281.5 273.0 265.1 308.9 350.3 13.4
     Increase in reserves 108.7 80.5 133.1 106.4 143.4 34.8
     Transfers to separate accounts -16.5 36.9 -38.0 -65.8 -89.6 NA
     Commissions 52.1 55.5 64.6 58.0 58.4 0.6
     General and administrative expenses 59.0 60.1 62.4 65.9 66.0 0.1
     Insurance taxes, licenses and fees 10.0 10.5 10.8 8.8 10.8 22.0
     Other expenses 66.0 -4.9 -2.7 -4.3 11.3 NA
     Total expenses $812.5 $775.5 $766.6 $759.3 $841.1 10.8%
Net income            
     Policyholder dividends 16.4 18.3 18.2 17.5 18.2 4.0
     Net gain from operations before federal income tax 49.0 54.4 67.1 63.0 46.0 -26.9
     Federal income tax 10.1 10.6 16.3 12.4 3.4 -72.3
     Net income before capital gains $38.9 $43.8 $50.8 $50.6 $42.6 -15.8%
     Net realized capital gains (losses) -1.3 -3.5 -11.4 -8.6 -4.7 NA
     Net income $37.6 $40.3 $39.4 $42.1 $37.9 -10.0%
     Pre-tax operating income 49.0 54.4 67.1 63.0 46.0 -26.9
     Capital and surplus, end of year 354.0 367.2 380.7 394.9 400.0 1.3

(1) Calculated from unrounded data.

NA=Not applicable.

Source: NAIC data, sourced from S&P Global Market Intelligence, Insurance Information Institute.

View Archived Tables

Annuities are the largest life product line as measured by direct premiums written and accounted for 48 percent of direct premiums written by life insurers in 2018. Accident and health insurance accounted for 27 percent of direct premiums written. Accident and health insurance, not to be confused with traditional health insurance, includes reimbursement for certain medical expenses. These include: short- and long-term disability; critical or catastrophic illness insurance; and long-term care. Life insurance accounted for the remaining 25 percent of direct premiums written. Life insurance policies can be sold on an individual, or ordinary, basis or to groups such as employees and associations. Other lines include credit life, which pays the balance of a loan if the borrower dies or becomes disabled and industrial life, small policies whose premiums are generally collected by an agent on a weekly basis.

Direct Premiums Written By Line, Life/Annuity Insurance, 2016-2018

($000)

  2016 2017 2018
Lines of insurance Direct premiums
written (1)
Percent
of total 
Direct premiums
written (1)
Percent
of total 
Direct premiums
written (1)
Percent
of total 
Annuities            
Ordinary individual annuities $197,026,489 28.8% $181,849,769 26.3% $207,806,482 28.3%
Group annuities 129,332,100 18.9 134,348,059 19.4 146,170,467 19.9
Total $326,358,589 47.8% $316,197,828 45.7% $353,976,949 48.3%
Life            
Ordinary life 139,782,420 20.5 143,537,902 20.8 142,275,947 19.4
Group life 36,427,380 5.3 39,856,057 5.8 38,489,232 5.2
Credit life (group and individual) 828,632 0.1 808,621 0.1 814,935 0.1
Industrial life 129,303 (2) 123,394 (2) 107,475 (2)
Total $177,167,735 25.9% $184,325,974 26.7% $181,687,589 24.8%
Accident and health (3)            
Group 115,363,684 16.9 126,290,331 18.3 134,735,315 18.4
Other 63,637,078 9.3 63,725,795 9.2 61,941,132 8.4
Credit 822,146 0.1 830,946 0.1 852,520 0.1
Total $179,822,908 26.3% $190,847,071 27.6% $197,528,967 26.9%
All other lines 3,315 (2) 3,839 (2) 4,723 (2)
Total, all lines (4) $683,352,546 100.0% $691,374,713 100.0% $733,198,228 100.0%

(1) Before reinsurance transactions.
(2) Less than 0.1 percent.
(3) Excludes accident and health premiums reported on the property/casualty and health annual statements.
(4) Excludes deposit-type funds.

Source: NAIC data, sourced from S&P Global Market Intelligence, Insurance Information Institute.

View Archived Tables