Market Overview

Best's Special Report: Preliminary First-Half 2018 Results Show 13% Net Income Drop for U.S. Life/Annuity Industry

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Net income in the U.S. life/annuity industry dropped nearly 13% in
first-half 2018, which along with an increase in stockholder dividend
payments, drove industry capital and surplus down by 1.8% compared with
the prior year end. This financial review is detailed in a new Best's
Special Report
, titled, "A.M. Best First Look—First Half 2018
Life/Annuity Financial Results," and the data is derived from companies'
six-month 2018 interim statutory statements that were received as of
Aug. 21, 2018, representing an estimated 85% of total industry premiums
and annuity considerations.

According to the report, the U.S. life/annuity industry recorded a $6.0
billion decline in premiums and annuity considerations during the first
half of 2018, but it nearly was offset completely by a $5.9 billion
increase in net investment income. In addition, pretax net operating
gains for the industry declined to $24.9 billion for the first six
months of 2018, down 9.5% from the prior year period. A $3.5 billion
reduction in federal and foreign taxes was countered by additional net
realized capital losses of $3.3 billion, resulting in total industry net
income declining to $17.0 billion from $19.5 billion in the same period
of 2017. Capital and surplus dropped to $371.4 billion in first-half
2018 from $378.3 billion at the start of the year.

The trend of reduced cash and bond positions in the industry continued
during the first half of 2018, with further increases to mortgage loans
and other invested assets. The shift is most striking in mortgage loans,
which have grown steadily over the first-half periods of the last five
years—up 41% from the first half of 2014—to constitute 12.4% of total
invested assets in the first half of 2018.

To access a copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=277330.

A.M. Best is a global rating agency and information provider with a
unique focus on the insurance industry. Visit
www.ambest.com
for more information.

Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its
affiliates. ALL RIGHTS RESERVED.

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