Best’s Market Segment Report: Despite Navigating Pandemic Well in 2020, U.S. Life/Annuity Industry Not Out of the Woods Yet

March 8, 2021 9:06 AM EST

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OLDWICK, N.J.--(BUSINESS WIRE)-- Most rated U.S. life/annuity (L/A) insurance companies have remained well-capitalized during the pandemic to date, and have benefited from favorable mortality and morbidity experience, low credit impairments and rebounding equity markets. However, according to AM Best’s annual Review & Preview market segment report, the sales process remains a challenge, with economic risks carrying over into 2021.

The new Best’s Market Segment Report, titled, “U.S. Life/Annuity Industry Weathers the Pandemic Well in 2020,” states that absolute capital and surplus (C&S) for the segment grew by approximately 5% through Sept. 30, 2020, from the prior-year period, benefiting primarily from positive, albeit significantly lower, earnings and a change in unrealized capital gains. Net income for the L/A industry in the nine-month 2020 period fell by 55% from the same period of 2019 to $13.2 billion.

Low interest rates and L/A carriers’ desire to hold more liquidity during the pandemic drove an increase in debt issuance, as companies took advantage of the opportunity to refinance older issues that had been priced at higher interest rates. Debt issuance for the L/A carriers amounted to nearly $35 billion through September 2020, significantly higher than the approximately $20 billion through September 2019.

Some offsets to the ongoing macroeconomic challenges the L/A insurers face are favorable underwriting and evolving risk management practices, including the use of hedges, adjustments to crediting and discount rates, and a focus on technology to improve sales. Still, the industry has been facing the challenge of adapting to the remote work environment while converting to virtual sales practices during a period where a COVID-19-fueled spike in unemployment has been a drag on demand, despite a renewed interest in the need for life insurance on the part of consumers.

While companies in this market segment will need to focus a significant amount of attention to mitigating these risks and others, the report notes that they can ill-afford to allocate resources to strictly defensive initiatives, if they are to survive and grow over the long term. In 2021, leveraging capabilities developed to support remote work and sales environments during the pandemic in order to better position their business models for top-line growth will be critical. A flurry of merger and acquisition announcements in early 2021 reinforces AM Best’s expectations that the L/A segment will remain heavily focused on interest rate risk amid declining interest margins. AM Best will continue to monitor the industry to see how it meets these challenges.

To access the full copy of this market segment report, please visit

A video interview about this market segment report with AM Best Senior Director Thomas Rosendale and Director Rosemarie Mirabella is available at

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

Copyright © 2021 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Thomas Rosendale
Senior Director
+1 908 439 2200, ext. 5201

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159

Jim Peavy
Director, Communications
+1 908 439 2200, ext. 5644

Source: AM Best

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