Capital and Surplus



U.S. Life and A&H Insurance Industry Analysis Report?life Industry Overview473392536195Inside the ReportPage No.Filings2Premium2-4Investment Income4-5Operations5-6Assets7-8Liabilities8Capital & Surplus8Liquidity8-9Separate Accounts9-10?00Inside the ReportPage No.Filings2Premium2-4Investment Income4-5Operations5-6Assets7-8Liabilities8Capital & Surplus8Liquidity8-9Separate Accounts9-10?Table 1 provides the life insurance industry’s aggregate financial results for insurers filing with the NAIC on the life, accident & health annual statement blank. ·?The life insurance industry reported a decrease in overall profitability from year-end 2019 of 56.2% to $17.4 billion.·?Direct written premiums and deposits increased 6.8% to $1.0 trillion largely due to a $56.6 billion (28.6%) increase in deposit-type contracts to $254.4 billion.·?The industry’s total capital and surplus increased 2.7% to $451.0 billion compared to prior year-end. ·?Total net admitted assets increased 7.8% to $8.2 trillion compared to prior year-end. -1339855334000??right190500Filings As shown in Figure 1, for year-end 2020, a total of 771 companies filed with the NAIC on the life, accident & health annual statement blank. There were 12 companies that reported to be party to a merger, five more than reported in 2019. Premium Written Premiumsright73088500The life industry reported an increase of 6.8% ($65.9 billion) in total direct written premium and deposits to $1.0 trillion in 2020. Total net written premiums and deposits decreased 7.8% ($54.3 billion) to $637.6 billion. Table 2 shows total direct written, assumed, ceded and net premium by line of business for the last two years. ?ReinsuranceTotal ceded premium increased 21.4% ($54.1 billion), of which the largest increase was seen in the annuities line of business, with an increase of 66.3% or $41.8 billion to $104.9 billion for 2020, offset partially by an $18.5 billion decrease in the life line of business. The majority of the change in ceded premium is reflected in six companies with increases or decreases of more than $5 billion. Of the 727 companies that reported ceded premiums, 49 companies with over $100 million in ceded premiums reported changes of over 25% from 2019.?Total assumed premium decreased 7.6%, or $13.1 billion, primarily driven by the life line of business, which decreased $25.6 billion for 2020, offset partially by a $9.4 billion increase in the annuities line of business. ?Life InsuranceThe life insurance line of business reported a 4.8% or $7.5 billion decrease to $150.2 billion on a net basis due to a combination of the $25.6 billion decrease in assumed premiums and a $18.5 billion decrease in ceded premium for 2020. Deposit-type ContractsDeposit-type contracts of $246.4 billion experienced a 25.2%, or $49.5 billion, increase over what was reported in 2019, and a 138.1% increase over the $103.5 million reported in 2011. Annuitiesright71437500Net premiums for annuity considerations decreased 15.5%, or $43.3 billion, to $236.2 billion for year-end 2020. The decrease in net premiums for 2020 was attributed to a combination of a 23.2% ($9.4 billion) increase in assumed premiums and a 66.3% ($41.8 billion) increase in ceded premiums, compared to year-end 2019. Table 3, on the previous page, illustrates state detail for 2020 and 2019, by premium type, with the three largest states for each premium type highlighted. As you can see in the table, California has the largest percentage of premiums in life insurance, annuity considerations, and other considerations. Texas has the largest percentage of premiums in A&H insurance and New York has the largest percentage of deposit-type contract funds. right1143000Earned PremiumsOn an earned basis, the industry reported a 7.8% ($54.3 billion) decrease in net earned premium to $637.6 billion. Table 4 shows a breakdown of net earned premium by line of business for 2020 and 2019. AnnuitiesTotal annuity considerations decreased 12.9%, or $44.4 billion, to $300.7 billion for 2020. The decrease was primarily driven by a 54.0%, or $36.6 billion, decrease in indexed annuities. Variable annuities with and without guarantees accounted for 51.1% of total annuity considerations. Life InsuranceTotal Life insurance premiums increased 1.1% to $139.6 billion for year-end 2020. Whole life and term life accounted for 67% of total life insurance premiums. Term life increased 8.4%, or $2.6 billion and whole life increased 0.9%, or $0.5 billion, both compared to year-end 2019. A&HTotal A&H was relatively unchanged overall, decreasing 0.4%, or $0.6 billion, for year-end 2020.The largest increase was seen in title XVIII Medicare premiums, which increased 19.6%, or $5.3 billion, while the largest decrease was seen in disability income, which decreased 11.3%, or $3.0 billion, both compared to 2019. Investment IncomeNet investment income decreased 0.1% ($172.9 million), to $187.3 billion in 2020 compared to $187.4 billion in 2019. The decrease was driven by the following: ·?Investment income from cash and short-term investments decreased $1.5 billion to $1.5 billion·?Investment income from affiliated common stock decreased $1.2 billion to $10.1 billion·?Investment income from unaffiliated other bonds decreased $752.0 million to $131.9 billion right1424200·?Investment income from derivatives increased $2.5 billion to $4.8 billion ?The industry’s invested asset portfolio increased 7.0% to $4.8 trillion at year-end 2020. Figure 2 illustrates net investment income by asset class. ?The Other Investments category*, seen in Figure 2, increased to 13.1% of total investment income, from 12.7% at year-end 2019, primarily from a 1.2 point increase in derivatives to 2.3%.?4349338321220* Includes: affiliated bonds, real estate, cash, short-term investments, derivatives, BA Assets, and write-ins.4000020000* Includes: affiliated bonds, real estate, cash, short-term investments, derivatives, BA Assets, and write-ins.The industry’s net investment yield decreased 0.3 percentage point to 4.0% as seen in Figure 3. In 2020, the Federal Reserve decreased the federal funds interest rate as follows:right1157100·?2020·?March 3—to 1.00% from 1.25%·?March 16—to 0.25% from 1.00%??Operations19416986844800The industry reported profitability of $27.6 billion in 2020 compared to $49.4 billion for 2019, a $21.9 billion decrease. The decline was primarily driven by a decrease in premiums, which decreased $55.2 billion to $635.9 billion for year-end 2020. Death benefits increased 15.1% ($12.1 billion) to $92.0 billion compared to $79.9 billion at prior year-end. The changes are shown below on Table 5. ?right000Realized losses in derivative instruments were $5.0 billion for 2020 compared to realized losses of $5.1 billion for 2019. Concurrently, unaffiliated other bonds reported realized gains of $8.9 billion compared to losses of $4.4 million for 2019. The impact realized losses have had on net income over the past ten years is depicted in Figure 4. Annuitiesright73127200The annuities line of business reported a $24.1 billion net income, a 36.5% ($13.9 billion) decrease compared to year-end 2019. Variable annuities with guarantees was the largest line of annuity business, which reported a 46.7% decline in operating gains to $17.0 billion for year-end 2020. The only operating loss reported in the annuities line of business was indexed annuities, which reported a $1.4 billion operating loss. Life InsuranceTotal life insurance reported a $7.3 billion operating gain, a 67.7%, or $15.4 billion decrease compared to year-end 2019. Whole life reported the largest operating gain of $15.4 billion, while universal life with secondary guarantee reported the largest operating loss of $7.9 billion, both for 2020. ?Accident & Health Total A&H reported a 34.8% increase in operating gains to $18.6 billion for 2020. The largest operating gain for A&H was $8.3 billion reported in other health. ?AssetsThe life industry reported an 7.8% increase in total net admitted assets at Dec. 31, 2020 to $8.2 trillion. The increase was primarily in separate accounts, which increased 8.9% to $3.1 trillion and accounted for 37.6% of total net admitted assets. Over the past five years, the industry has seen significant increases in several asset classes as shown in the 5-year change column in Table 7. See page 9 for discussion of separate accounts. 3143251524000As seen in Figure 5, the industry has seen an increase in affiliated investments over the past ten years. The largest components of affiliated investments were:·?common stock—$150.9 billion·?other affiliated assets—$108.0 billion ·?affiliated bonds—$34.6 billion?right000left000As seen in Figure 6, the majority of the industry’s bond portfolio is comprised of industrial and miscellaneous bonds, 76.9%. ?The industry’s allocation of long-term bonds is shown in Figure 7, with the majority (78.7%) being issuer obligations. The industry’s holdings of noninvestment-grade bonds increased 25.4% ($43.4 billion) and represented 6.2% of total bonds at Dec. 31, 2020. The distribution of bonds between class NAIC 1 through class NAIC 6 has been essentially flat for the last five years. ?The life insurance industry maintains a relatively unchanged portfolio of bond maturities with 33.7% of the holdings at year-end 2020 due to mature in five years or less compared with 32.6% at year-end 2019. Bonds with a maturity of ten years or later represented 38.2% of total bonds. Figure 8 illustrates bond distribution by maturity.30384754445000219075444500?LiabilitiesThe life industry reported an 8.0% ($573.6 billion) increase in total liabilities to $7.8 trillion at year-end 2020. The largest increases were in the following:3.3% ($98.9 billion) increase in reserves for life contracts to $3.1 trillion41.1% ($44.2 billion) increase in funds held under coinsurance to $151.7 billion27.8% ($39.6 billion) increase in funds held under reinsurance treaties with unauthorized reinsurers to $182.4 billion10.9% ($37.9 billion) increase in liability for deposit-type contracts to $386.6 billion?Capital and Surplusright5715000The life industry’s capital and surplus increased by 2.7% to $451.0 billion compared to $439.0 billion at Dec. 31, 2019 due primarily to the $27 billion net income discussed on page 5 and $15.3 billion capital paid in, mostly offset by dividends paid to stockholders of $31.9 billion.?As seen in Figure 9, the industry’s return on equity decreased to 3.9% from 9.0% in 2019 due mainly to the industry’s decrease in net income. ?LiquidityThe life industry reported operating cash flow of $179.7 billion in 2020, up 1.8% ($3.1 billion) from $176.6 billion in the prior year. The increase was primarily from a decrease in commissions of 8.3% ($12.7 billion) and a decrease in benefits and loss payments of 1.5% ($10.2 billion). Concurrently, miscellaneous income decreased 8.9% ($6.9 billion) and net premium decreased 1.0% ($6.9 billion). right000The industry experienced a 4.9% ($16.7 billion) decrease in surrender benefits to $328.1 billion. Figure 10 shows the industry’s operating cash flow and surrender activity over the past ten years. The life industry reported $(208.7) billion in net cash from investment activity as total investment proceeds of $825.8 billion were surpassed by $1.0 trillion in total investments acquired. The largest increase in investments acquired was $114.4 billion in bonds to $827.7 billion and $16.2 billion in stocks to $43.8 billion. Net cash from financing activity increased 494.6% ($52.8 billion) to $63.5 billion mostly from a $22.3 billion increase in other cash applied to $42.7 billion and a $15.6 billion increase in net deposit-type contracts to $25.6 billion. ?Separate Accountscenter9588500The life industry reported an 8.9% increase in separate account assets to $3.1 trillion at Dec. 31, 2020. Likewise, total separate account liabilities increased 8.9% to $3.1 trillion. Aggregate separate account reserves for life, annuity and A&H products increased 8.5% ($214.2 billion) to $2.7 trillion and liability for deposit-type contracts increased 7.4% ($16.5 billion) to $239.5 billion. ?Net investment income and capital gains and losses decreased to $339.6 billion compared to $448.2 billion for 2019.0 Net gain from operations decreased 28.2% ($225.8 million) to $(576.0) million. ?Separate account fees increased 1.7% to $37.8 billion from $37.2 billion at Dec. 31, 2019. The ratio of separate account fees to separate account assets decreased to 1.2% from 1.3% and the industry’s CARVM allowance increased 1.3% to $(26.9) billion. Separate account surplus increased 19.4% ($571.5 million) to $3.5 billion compared to year-end 2019.?left11430NAIC Financial Regulatory Services Financial Analysis and Examination Department?Contacts:Kelly Hill, Senior Financial AnalystKAHill@ Bruce Jenson, Assistant Director, Solvency MonitoringBJenson@ 816.783.8348?Jane Koenigsman, Senior Manager I, Life/Health Financial Analysis JKoenigsman@ 816.783.8145?Ralph Villegas, Manager II, Life Financial AnalysisRVillegas@ 816.783.841100NAIC Financial Regulatory Services Financial Analysis and Examination Department?Contacts:Kelly Hill, Senior Financial AnalystKAHill@ Bruce Jenson, Assistant Director, Solvency MonitoringBJenson@ 816.783.8348?Jane Koenigsman, Senior Manager I, Life/Health Financial Analysis JKoenigsman@ 816.783.8145?Ralph Villegas, Manager II, Life Financial AnalysisRVillegas@ 816.783.8411???left2362200DISCLAIMERThe NAIC year-end 2020 U.S. Life and A&H Insurance Industry Analysis Report is a limited scope analysis based on the aggregated information filed to the NAIC’s Financial Data Repository as of Dec. 31, 2020, and written by the Financial Regulatory Services Department staff. This report does not constitute the official opinion or views of the NAIC membership or any particular state insurance department.00DISCLAIMERThe NAIC year-end 2020 U.S. Life and A&H Insurance Industry Analysis Report is a limited scope analysis based on the aggregated information filed to the NAIC’s Financial Data Repository as of Dec. 31, 2020, and written by the Financial Regulatory Services Department staff. This report does not constitute the official opinion or views of the NAIC membership or any particular state insurance department. ................
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