2020 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 2019. 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 is not considered a part of the life/annuity sector, is 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 and health insurance, which is included in the life/annuity and property/casualty (P/C) sectors, encompasses 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 is not meant to replace health insurance.

 

2019 Financial Results

Net income after taxes for the life/annuity insurance industry grew 18.1 percent in 2019 to $44.7 billion from $37.8 billion in 2018, according to S&P Global Market Intelligence. Net income before capital gains grew 21.1 percent in 2019 from 2018, but a net realized capital gains loss of $6.9 billion reduced the net income level to $44.7 billion. Premiums and annuity considerations rose 12.7 percent in 2019, following weak growth in 2018, reflecting the 26.8 rise in annuity premiums and deposits, as life insurance premiums were flat. Expenses grew slightly in 2019, up 0.4 percent, following a 10.6 percent increase in 2018. Capital and surplus rose to $422.2 billion in 2019, up 5.5 percent from $400.1 billion in 2018, according to S&P Global Market Intelligence.

Life/Annuity Insurance Income Statement, 2015-2019

($ billions, end of year)

  2015 2016 2017 2018 2019 Percent change,
2018-2019 (1)
Revenue            
     Life insurance premiums $151.4 $115.0 $137.1 $145.1 $145.1 (2)
     Annuity premiums and deposits 324.0 318.5 287.2 269.7 341.9 26.8%
     Accident and health premiums 158.8 162.8 169.3 183.1 186.2 1.7
     Credit life and credit accident and health premiums 1.4 1.3 1.3 1.3 (3) NA
     Other premiums and considerations 2.5 2.2 2.1 4.0 6.7 67.4
     Total premiums, consideration and deposits $638.2 $599.9 $597.1 $603.2 $679.9 12.7%
     Net investment income 170.8 173.0 182.3 187.4 186.6 -0.4
     Reinsurance allowance -86.4 -17.0 -25.1 32.0 -29.7 NA
     Separate accounts revenue 35.2 34.7 36.6 37.3 36.8 -1.4
     Other income 90.5 61.3 49.2 44.0 48.8 10.7
     Total revenue $848.2 $851.9 $839.9 $903.9 $922.3 2.0%
Expense            
     Benefits 263.9 271.4 281.4 289.5 302.2 4.4
     Surrenders 273.0 265.1 308.9 350.3 339.6 -3.0
     Increase in reserves 80.5 133.1 106.4 143.3 120.6 -15.9
     Transfers to separate accounts 36.9 -38.0 -65.8 -89.6 -72.0 NA
     Commissions 55.5 64.6 58.0 58.3 61.2 4.9
     General and administrative expenses 60.1 62.4 65.9 65.9 67.9 3.0
     Insurance taxes, licenses and fees 10.5 10.8 8.8 10.7 9.3 -13.4
     Other expenses -4.9 -2.7 -4.1 11.3 14.4 27.1
     Total expenses $775.5 $766.6 $759.4 $839.8 $843.2 0.4%
Net income            
     Policyholder dividends 18.3 18.2 17.5 18.2 18.1 -0.4
     Net gain from operations before federal income tax 54.4 67.1 63.0 46.0 61.0 32.7
     Federal income tax 10.6 16.3 12.4 3.4 9.4 177.7
     Net income before capital gains $43.8 $50.8 $50.6 $42.6 $51.5 21.1%
     Net realized capital gains (losses) -3.5 -11.4 -8.6 -4.7 -6.9 44.6
     Net income $40.3 $39.4 $42.1 $37.8 $44.7 18.1%
     Pre-tax operating income 54.4 67.1 63.0 46.0 61.0 32.7
     Capital and surplus, end of year 354.0 367.2 380.7 394.9 400.0 5.5

(1) Calculated from unrounded data.
(2) Less than 0.1 percent.
(3) Data not available.

NA=Not applicable.

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

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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 2019. 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, 2017-2019

($000)

  2017   2018   2019  
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 $181,849,769 26.3% $207,806,482 28.3% $217,475,933 28.6%
Group annuities 134,348,059 19.4 146,170,467 19.9 148,066,084 19.5
Total $316,197,828 45.7% $353,976,949 48.3% $365,542,017 48.1%
Accident and health (2)            
Group 126,286,104 18.3 134,734,119 18.4 139,417,933 18.4
Other 63,725,793 9.2 61,947,822 8.4 63,817,827 8.4
Credit 830,946 0.1 852,520 0.1 888,758 0.1
Total $190,842,843 27.6% $197,534,461 26.9% $204,124,517 26.9%
Life            
Ordinary life 143,537,902 20.8 142,275,947 19.4 149,041,507 19.6
Group life 39,856,057 5.8 38,489,603 5.2 39,744,357 5.2
Credit life (group and individual) 808,621 0.1 814,935 0.1 808,078 0.1
Industrial life 123,394 (3) 107,475 (3) 74,820 (3)
Total $184,325,973 26.7% $181,687,959 24.8% $189,668,763 25.0%
All other lines $3,839 (3) $4,723 (3) $5,093 (3)
Total, all lines (4) $691,370,484 100.0% $733,204,093 100.0% $759,340,391 100.0%

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

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

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