Best’s Market Segment Report: AM Best Maintains Stable Outlook on US Life/Annuity Insurance Segment

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has maintained its market segment outlook for the U.S. life/annuity insurance segment at stable, supported by a continuation of top-line growth, along with healthy capital and risk-adjusted capital levels.

In its Best’s Market Segment Report, “Market Segment Outlook: US Life/Annuity,” AM Best states that the life/annuity segment has been able to grow surplus and maintain strong overall balance sheet metrics amid very strong growth in recent years. While surrender activity has also picked up with changes in interest rates and sales, the industry’s commitment to strong asset-liability matching, along with liquidity stress testing, has proven capable in dealing with these challenges.

According to the report, a deterioration in the quality of the capital and assets somewhat offsets the robust capital levels. AM Best is of the view that the increased use of reinsurance and offshore reinsurance to carry reserves on the liability side on a more-economic basis, as opposed to a more-conservative statutory basis, with the asset side of the balance sheet seeking the lowest risk-adjusted capital charges for its investments, leads to an overall lower quality of the balance sheet.

At the same time, operating performance remains strong for the industry. “While life sales have slowed in growth from the post-COVID bump, annuity sales continue to surge with record results in the last few years,” said Erik Miller, senior director, AM Best. “However, growth may not be maintained at this record pace, and continued entrants into the market can potentially lead to much stronger competition and increased risk-taking on the product side in terms of guarantees and crediting rates and on the asset side in terms of seeking higher yield.”

The report notes that from a business profile perspective, the life/annuity industry has been aided by many of these new entrants and new capital coming into the industry as legacy blocks of business have been repriced and sold, leading to a de-risking of the product profile.

Overall, AM Best has seen a renewed focus on enterprise risk management (ERM), and industry participants are clearly taking asset-liability management and stress testing seriously and using it to guide decision making. AM Best believes this is being driven by the need for a more holistic approach to encompass risks like reputation, cyber security and vendor management into their ERM programs, but also by more companies operating from a more diverse set of organizations, on and offshore, in different regulatory regimes, making it more necessary to move to a more enterprising view of risk management.

To access the full copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=360337.

Leading AM Best analysts will review 2026 market segment outlooks for the U.S. insurance industry’s major segments and the delegated underwriting authority enterprises (DUAE) segment in an online briefing scheduled for Tuesday, Dec. 9, 2025, at 2:00 p.m. EST. To register for the briefing, please visit “AM Best Briefing - 2026 Insurance Outlook: Risk Management Back in the Spotlight.”

To view current Best’s Market Segment Outlooks, please visit http://www.ambest.com/ratings/RatingOutlook.asp.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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