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FOR IMMEDIATE RELEASE
OLDWICK - OCTOBER 17, 2014 09:00 AM (EDT)
The first half of 2014 for the U.S. life/health (L/H) industry represents a continuation of a relatively stable trajectory over the past few years, according to this recent A.M. Best special report titled, "U.S. Life/Health Companies Circle the Wagons Awaiting Higher Interest Rates." Adjusting for the impacts of one-time events, trends in premiums, earnings, capital and investments all have been generally in line with recent history. As interest rates remain at historically low levels with prospects for higher rates uncertain, the resulting slow growth economy continues to act as a headwind and has prevented strong industry growth. For purposes of this Best's Special Report, the U.S. L/H industry includes all statutory "blue book" filers and excludes pure health insurance companies filing an "orange book."
The one area of notable growth has been individual annuity and deposit type contract premiums. In part, this may be an outgrowth of the mid-2013 increase in interest rates. With the 10-year Treasury note increasing roughly 100 basis points last year, some companies began to place more emphasis on individual annuity sales, which is evident when comparing premiums from the first half of 2014 with the first half of 2013.
Following several years of premium growth, direct premiums written (DPW) declined 5% in 2013--primarily a result of the 27% decline in group annuity premiums. This decline was driven primarily by a return to the historical norm after the unusual spike in 2012 from two large pension risk transfer transactions executed by Prudential Financial, Inc. The L/H industry's DPW returned to growth in the first half of 2014, increasing nearly 4% relative to the same period in 2013. However, while overall DPW grew only modestly, there was a shift in the distribution of premiums across product lines
After consistent annual growth of more than 10% since 2009, group accident and health (A&H) premiums were virtually flat through the second quarter of 2014. In addition, individual A&H premiums declined by 1% in the first half of 2014 compared with the same period in 2013. A.M. Best believes one driver of the recent lack of growth in A&H premiums is the establishment of health exchanges, which may have shifted some A&H business away from certain blue book filers.
For a full copy of this special report, please visit: http://www3.ambest.com/bestweek/purchase.asp?record_code=22971 .
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.