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.
According to S&P Global Market Intelligence in 2016 the life insurance industry posted a 2.2 percent decrease in net income after taxes. Net gains from operations (net of federal income tax) rose by nearly 16 percent, but capital losses of $11.4 billion offset all of that gain, and more. Premiums and annuity considerations were down 6.0 percent in 2016 compared with 2015 mainly because life insurance premiums fell by 24 percent. Expenses fell by 1.1 percent in 2016; benefits (including additions to reserves and transfers to separate accounts) dropped by 3.5 percent. Capital and surplus rose to $380.7 billion in 2016 from $367.2 billion in 2015, according to S&P Global Market Intelligence.
The life/health insurance industry’s cash and invested assets totaled $3.9 trillion in 2016, according to S&P Global Market Intelligence. Almost three-quarters of these assets were invested in bonds (see chart, Investments, Life/Health Insurers, 2014-2016. About 11 percent of life insurers' assets were held in real estate loans.
($ billions, end of year)