2023 US life statutory results: Individual annuity growth hits 21-year high

A resilient domestic economy, rising interest rates and ample supply of attractive products led to outsized expansion in individual annuities during a year of otherwise mixed growth in business volumes for the US life insurance industry.

According to estimates from S&P Global Market Intelligence, individual annuity direct premiums and considerations surged by 21.8% in 2023. This data, aggregated from individual entity reports available as of March 11, marks a third straight year of double-digit growth, and the most substantial annual growth rate for this product category since 2002.

Direct premiums and considerations across all lines of business reported by life and fraternal statement filers, including individual and group life, individual and group annuities, and accident and health, climbed by an estimated 5.9%. While that represented a step back from the industry's rates of expansion in 2021 and 2022, it is the first time in at least the last two decades that life insurance companies have achieved expansion greater than 5% for three consecutive years. An estimated 14.6% pullback in group annuity direct premiums and considerations from 2022, a record year for pension risk transfer activity, partially offset the historical strength in individual annuities.

High employment rates, strong equity markets and other favorable macroeconomic indicators bode well for sales of various types of individual annuities in 2024. The abundance of market participants, in part due to robust reinsurance capacity, also favors the continued marketing of a wide range of attractively designed and priced products.

Individual annuities: A hot commodity

Despite a historically challenging year-over-year comparison and a sharp slowdown in rates of expansion in the prior two reporting periods, the individual annuity business posted a remarkable resurgence in the fourth quarter of 2023. The comeback helped push full-year individual annuity growth past the 20% threshold.

We estimate fourth-quarter 2023 growth in individual annuity direct premiums and considerations of 28.1% to $102.44 billion, surpassing the record high for business volume in the last three months of 2022. This compares to more pedestrian, but still historically favorable, year-over-year growth rates of 10.9% and 8.7%, respectively, in the second and third quarters of 2023.

The top six individual entities in the individual annuity business each generated year-over-year growth in individual annuity direct premiums and considerations of more than 32% in the fourth quarter of 2023. Athene Holding Ltd.'s Athene Annuity and Life Co., which already ranked as the industry's largest annuity writer, posted year-over-year growth of 73.3%. Its $13.29 billion in production during the period accounted for 13.0% of the industry's total.

Massachusetts Mutual Life Insurance Co. ranked second among individual life entities with its $6.48 billion in fourth-quarter 2023 individual annuity direct premiums and considerations, an increase of 65.3%. The company's full-year total of $15.54 billion represented growth of 49.2% from 2022 levels, a development a company regulatory filing attributed to higher fixed annuity sales.

A redesign of the state pages of 2023 annual statements provides new granularity into the largest direct writers of various types of annuities. Year-over-year comparisons are unavailable, however, as previous annual statement blanks only provided product-level disclosures on a net basis.

For example, reported having generated $23.57 billion of its $35.30 billion in individual annuity direct premiums and considerations from fixed annuities, with another $10.88 billion from indexed annuities. Its share of the market for each of those products exceeded 10%, with the company enjoying a comfortable lead over the top-tier MassMutual company in the fixed annuity market and trailing only Allianz Life Insurance Co. of North America in indexed annuity production. Across all individual annuities, Athene Annuity & Life Co.'s 10.2% share represented an increase of 3 percentage points from 2022.

Expanded distribution has been a key to Athene's recent success, with significant traction reported during the second half of 2023, including through a newly launched relationship with JPMorgan Chase & Co. Athene expects further growth in its capabilities among money center banks and broker-dealers in 2024.

Athene President Grant Kvalheim, speaking during a Feb. 21 conference call, said that during the rising interest rate environment in 2023, the company had been surprised to find that banks "preferred selling [multiyear guaranteed annuities] and earning the fees to competing for deposits." Kvalheim said he believes sales of the product will remain "pretty strong" even if the Federal Reserve lowers interest rates by 75 basis points or more during 2024.

An inevitable pullback

The combination of record issuance of single-premium group annuities to effect pension risk transfers and growth in stable value products amid volatile markets in 2022 set an almost impossibly high bar for the overall group annuity business in 2023.

Group annuity direct premiums and considerations fell to their lowest annual tally since 2019 in a business line known for its volatility. Nine percentage points of the estimated 14.6% drop came as a result of the nonrecurrence of 2022's blockbuster $16 billion International Business Machines Corp. pension risk transfer deal, which had been split among Prudential Financial Inc.'s The Prudential Insurance Company of America and MetLife, Inc.'s Metropolitan Life Insurance Company. New York Life Insurance Co. posted a 34.1% year-over-year decline in the business line, reporting in a regulatory filing earlier in 2023 that its institutional annuities segment suffered from lower sales of stable value products and guaranteed investment contracts.

Favorable supply and demand dynamics, highlighted by the entry of new participants into the pension risk transfer business and a prevalence of fully funded defined benefit plans, suggest a strong year for group annuity production in 2024. The decidedly lower bar in 2023 could set the stage for a resurgence of volumes in 2024.

When reviewing group annuity production on the new state pages of 2023 annual statements, it is important to note that the totals reported on Exhibit 1 roughly correspond to the sum of two distinct columns: Premiums and annuity considerations plus other considerations. Previously, other considerations were disclosed on the state pages as a lump sum across business lines. Group annuities accounted for approximately 99% of the other considerations reported in 2023.

Life insurance lags again

While LIMRA's preliminary US life insurance sales survey labeled 2023 a record year for new retail life annualized premium, statutory filings show a mixed picture.

Direct individual life premiums, which include new and existing policies, slipped by an estimated 0.1% when normalizing for reporting changes. With 2023 data unavailable for several life insurers as of this article's publication date, the year-over-year comparison may end up either slightly positive or negative. For a second straight year, the business is straddling the break-even line after estimated individual life direct premiums slipped by 0.002% in 2022. All but the most insignificant rise in 2023 would make for a record year of volume.

Individual life market leader The Northwestern Mutual Life Insurance Co. posted a 3.7% decline in direct premiums in the business line, which the company attributed in a regulatory filing to lower sales of single-premium products. The product-level breakouts in the new state pages of 2023 annual statements showed Northwestern Mutual as the largest US individual whole life insurer based on premium volume.

Group life direct premiums, meanwhile, increased by an estimated 0.5%, although directional trends varied widely among leading writers.

Methodology

Industry-level results referenced in this article generally are based on the sum of individual entity disclosures on Exhibit 1 of annual statements unless otherwise noted, and are subject to change as additional information is received. Due to reporting changes that took effect with the 2023 annual statements, it was not possible to generate precise apples-to-apples comparisons for the individual and group life businesses, so we have estimated historical values for several business lines.

The individual life line includes what was previously classified as ordinary life in addition to industrial life, previously a standalone business line. We also applied the ratio of individual credit life to total credit life premiums in 2023 from the new state pages of annual statements for preceding years as the line had been reported on a consolidated basis in 2022 and prior. The group life business for 2022 and prior was adjusted to add the majority of credit life premiums based on the aforementioned 2023 ratio. The accident-and-health business, although not the subject of this article, incorporates values previously broken out into group, other and credit categories.

Additionally, for those entities for which data was unavailable as of this article's publication date, our estimates assume 2023 premiums in line with 2022 values, subject to the various adjustments discussed above. These entities accounted for approximately 1% of 2022 direct premiums and considerations.

All references to analysis of state page disclosures in this article reflect values entered on the Grand Total pages. We have observed a couple of instances of individual entities that wrote non-US business opting to not populate the Grand Total page, but we did not adjust for those omissions.

Our analysis focuses on direct premiums and considerations due to the outsized effects on net volumes in recent years, and 2023 was no different. When viewing 2022 and 2023 results for those entities that reported financials for both years, net premiums and considerations fell by 3.6% due in large part to the accounting for a handful of large block cessions.

^{This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.}