2021 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 2020. 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.

2020 Financial Results

Net income after taxes for the life/annuity insurance industry fell 50.5 percent in 2020 to $22.2 billion from $44.7 billion in 2019, according to S&P Global Market Intelligence. Contributing to the decline in net income after taxes was a 36.2 percent decline in net income before capital gains and a capital loss of $10.7 billion. Premiums and annuity considerations fell 7.9 percent in 2020, following substantial growth in 2019, as annuity premiums and deposits, the largest sector for revenue, fell 13.3 percent. Expenses fell slightly in 2020, down 2.1 percent. Capital and surplus rose to $440.0 billion in 2020, up 4.3 percent from $421.7 billion in 2019, according to S&P Global Market Intelligence.

Life/Annuity Insurance Income Statement, 2016-2020

($ billions, end of year)

  2016 2017 2018 2019 2020 Percent change,
2019-2020 (1)
Revenue            
     Life insurance premiums $115.0 $137.1 $145.1 $151.0 $143.1 -5.3%
     Annuity premiums and deposits 318.5 287.2 269.7 339.8 294.6 -13.3
     Accident and health premiums 162.8 169.3 183.1 185.0 184.7 -0.2
     Credit life and credit accident and health premiums 1.3 1.3 1.3 1.4 1.2 -16.3
     Other premiums and considerations 2.2 2.1 4.0 (2) (2) (2)
     Total premiums, consideration and deposits $599.9 $597.1 $603.2 $679.4 $625.7 -7.9%
     Net investment income 173.0 182.3 187.4 186.7 186.0 -0.4
     Reinsurance allowance -17.0 -25.1 32.0 -29.7 -22.8 -23.2
     Separate accounts revenue 34.7 36.6 37.3 36.8 37.4 1.6
     Other income 61.3 49.2 44.0 48.7 55.0 12.8
     Total revenue $851.9 $839.9 $903.9 $921.9 $881.2 -4.4%
Expense            
     Benefits 271.4 281.4 289.5 301.8 314.2 4.1
     Surrenders 265.1 308.9 350.3 339.6 323.4 -4.8
     Increase in reserves 133.1 106.4 143.3 120.6 109.8 -8.9
     Transfers to separate accounts -38.0 -65.8 -89.6 -72.0 -69.2 -3.9
     Commissions 64.6 58.0 58.3 61.2 60.1 -1.8
     General and administrative expenses 62.4 65.9 65.9 67.8 67.0 -1.2
     Insurance taxes, licenses and fees 10.8 8.8 10.7 9.3 11.5 23.8
     Other expenses -2.7 -4.1 11.3 14.4 8.4 -41.8
Total expenses $766.6 $759.4 $839.7 $842.8 $825.2 -2.1%
Net income            
     Policyholder dividends 18.2 17.5 18.2 18.1 18.0 -0.5
     Net gain from operations before federal income tax 67.1 63.0 46.0 61.0 38.0 -37.7
     Federal income tax 16.3 12.4 3.4 9.4 5.1 -45.6
     Net income before capital gains $50.8 $50.6 $42.6 $51.6 $32.9 -36.2%
     Net realized capital gains (losses) -11.4 -8.6 -4.7 -6.9 -10.7 56.6
     Net income $39.4 $42.1 $37.9 $44.7 $22.1 -50.5%
     Pre-tax operating income 67.1 63.0 46.0 61.0 38.0 -37.7
     Capital and surplus, end of year 380.7 395.0 399.9 421.7 440.0 4.3

(1) Calculated from unrounded data.
(2) Data not available.

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 2020. 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, 2018-2020

($000)

  2018 2019 2020
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 $207,806,482 28.4% $217,475,954 28.6% $206,547,542 26.9%
Group annuities 146,170,467 20.0 148,066,084 19.5 163,115,551 21.3
Total $353,976,949 48.4% $365,542,038 48.1% $369,663,092 48.2%
Accident and health (2)            
Group 133,644,322 18.3 139,734,341 18.4 140,945,658 18.4
Other 61,922,237 8.5 63,839,456 8.4 68,111,710 8.9
Credit 852,520 0.1 889,583 0.1 725,330 0.1
Total $196,419,079 26.8% $204,463,380 26.9% $209,782,698 27.3%
Life            
Ordinary life 142,275,804 19.4 149,042,367 19.6 148,026,528 19.3
Group life 38,489,576 5.3 39,747,260 5.2 39,208,653 5.1
Credit life (group and individual) 814,935 0.1 810,896 0.1 687,128 0.1
Industrial life 107,475 (3) 74,820 (3) 85,053 (3)
Total $181,687,790 24.8% $189,675,343 25.0% $188,007,363 24.5%
All other lines 4,723 (3) 5,093 (3) 5,103 (3)
Total, all lines (4) $732,088,541 100.0% $759,685,854 100.0% $767,458,257 100.0%

(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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