OLDWICK, N.J.--(BUSINESS WIRE)--U.S. publicly traded life/annuity insurers saw total revenue rise by 5.9% in 2017, to $311.9 billion, on the backs of increased net investment income, fees and commissions and premium revenue.
The Best’s Special Report, “Quick Look: U.S. L/A GAAP Earnings Review—Year-End 2017,” notes that the industry garnered a year-over-year $9.5 billion tax benefit in 2017 due to the impact of tax reform, with nearly three-quarters of that going to Prudential, Inc., MetLife, Inc. and Aflac. The revenue growth resulted in a 6.5% increase in operating income, despite roughly one-third of the companies reporting a decline from 2016. However, net income grew substantially in 2017, up nearly 60% to $29.5 billion.
Fees and commissions revenue grew by 7.3%, primarily driven by growth in assets under management (AUM) and mean account values, owing to an increase in the daily average equity markets. Higher fees on variable annuities, driven by higher average separate account balances, also contributed to the increase in fee income. Although annuity revenue rose on the growth of AUM, annuity sales were marginal, influenced by an overall industry decline and shift away from variable annuity products, as well as the focus of carriers and independent marketing organizations on the evolving Department of Labor (DOL) fiduciary rule and implementation. The majority of companies reported marginal growth in investment income due to higher AUM and a larger asset base.
The publicly traded L/A insurers maintain relatively strong balance sheets. Nevertheless, strong GAAP earnings, focused business profiles, ongoing enhancements to enterprise risk management, external and internal forces and changing consumer preferences and behavior will likely continue to pressure earnings for the industry.
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