SPECIAL REPORT
Special Report: Life/Annuity Insurers 3Q15 Earnings Stall From Poor Equity Market Showing

Many life insurance companies saw their third quarter 2015 statutory accounting results soften when compared to prior quarters as pre-tax net operating gains were the lowest they have been over the previous fifteen quarters. This is partially due to the impact of equity market volatility and weakening investment yield. When A.M. Best looked at the changes in the S&P, we found that the index declined 7% in the discrete third quarter (Exhibit 1), pressuring operating earnings and contributing to a decrease in separate account assets. Net investment income has also not seen significant growth despite a larger asset base as investment returns on bonds have been impacted by continued low interest rates (Exhibit 2). This impact of market volatility is noted in the increases in reserves for the third quarter following reserve releases in the first and second quarters of 2015 (Exhibit 3).