A.M. Best Special Report: U.S. Life/Annuity Writers Manage Through a Lower for Longer Reality

OLDWICK, N.J.--()--The U.S. life/annuity segment will continue to wrestle with many of the same familiar challenges in 2015 that the industry has faced for the past few years, according to a new A.M. Best special report.

The 2015 Review & Preview Best’s Special Report, titled “U.S. Life/Annuity Writers Manage Through a Lower for Longer Reality,” cites a number of factors that will continue to pose hurdles; chief among them are historically low interest rates, marginal to declining premium growth and regulatory uncertainly. Yet A.M. Best also notes that the longer term outlook for life/annuity writers is also ripe with opportunities, primarily from the pressing global need for retirement solutions.

A.M. Best has maintained its rating outlook of stable for the U.S. life/annuity segment, citing favorable factors such as a supportive benign credit environment, the effects of higher equity markets, high risk-adjusted capitalization and stable earnings. Nevertheless, the sector continues to struggle with myriad issues, including subpar returns on some legacy blocks of business.

A.M. Best has observed that despite the lower for longer scenario, life/annuity companies have continued to enjoy relatively stable investment margins, and spread-based earnings generally have been resilient through careful management of crediting rates. However, the overall asset/liability duration matching process has been somewhat harder to manage, as some carriers remained short on the asset side in anticipation of rising rates in 2014. Spread maintenance has been impacted positively by expense reductions at the corporate level and in product distribution. However, A.M. Best is concerned that the easy fix options have been exhausted and that further reductions may cut expenses too deeply in areas that are needed to develop and sustain growth.

To access a copy of this special report, which includes a breakdown of the life/annuity sector, along with 2014 rating trends, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=233961.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2015 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

Contacts

A.M. Best
Stephen Irwin, 908-439-2200, ext. 5454
Vice President
stephen.irwin@ambest.com
or
Christopher Sharkey, 908-439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Rosemarie Mirabella, 908-439-2200, ext. 5892
Assistant Vice President
rosemarie.mirabella@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com

Contacts

A.M. Best
Stephen Irwin, 908-439-2200, ext. 5454
Vice President
stephen.irwin@ambest.com
or
Christopher Sharkey, 908-439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Rosemarie Mirabella, 908-439-2200, ext. 5892
Assistant Vice President
rosemarie.mirabella@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com