Relentless annuity momentum powers outsized US life industry growth in Q1

US life insurers posted one of their most rapid rates of growth in direct premiums and considerations on record in the first quarter on the strength of individual annuity sales and jumbo pension risk transfer single-premium group annuity issuance.

Total-filed direct premiums and considerations across the life, annuity and accident and health lines as reported on life quarterly statement blanks and excluding deposit-type contracts surged by nearly 19.0%, according to an S&P Global Market Intelligence analysis of newly released statutory data. That marks the industry's second-highest rate of expansion in the past two decades and the first time in nearly 22 years that it has produced double-digit expansion in consecutive quarters. Note that our analysis makes certain adjustments to as-reported data that materially impacts select line-of-business aggregates and growth rates.

Strength in sales of individual fixed deferred, fixed indexed and registered index-linked annuities, among other products, continue to drive the industry's overall growth. Individual annuity direct premiums and considerations topped $100 billion for second straight quarter and the second time on record, rising by 20.6% year over year. Individual annuity volume last declined on a year-over-year basis in the throes of the COVID-19 pandemic in the third quarter of 2020. Since then it has risen by double-digit percentages in 11 of 14 quarters and by 20% or more on five occasions.

Large pension risk transfer transactions have occasionally supercharged the industry's overall growth rates during that stretch, including in the first quarter. Thanks to at least two multibillion-dollar deals, group annuity direct premiums and considerations surged by 56.4% to $53.73 billion, the second-highest tally in any quarter on record behind only the fourth quarter of 2012.

The second quarter presents a more challenging comparison in the often-lumpy group annuity business. But even with a sequential decline in individual annuity volumes comparable to the second quarter of 2023, the individual annuity business would still be poised to grow by more than 20%.

Group annuities

The Prudential Insurance Company of America led the US life industry in both group annuity and total-filed direct premiums and considerations, propelled by pension risk transfer transactions with Verizon Communications Inc. and Shell USA Inc. The Prudential Financial Inc. subsidiary posted $18.31 billion and $20.83 billion, respectively, in group annuity and total life, annuity and accident and health premiums, excluding deposit-type contracts, according to the company's first-quarter statutory statement.

The total-filed premium volume marked a year-over-year increase of more than 209.0% to a level that exceeded the $14.82 billion in direct premiums reported globally by the Prudential holding company. Prudential Insurance Co. of America also reported an unusually high level of surrender benefits and withdrawals for life contracts during the first quarter. Its tally of $10.48 billion exceeded the year-ago period’s result by more than 5x to the highest sum reported on that line item by any individual entity in a single quarter in more than 15 years.

Prudential valued the Shell USA transaction at $4.9 billion. The $5.9 billion Verizon transaction was split between Prudential and Reinsurance Group of America Inc., with the two insurers issuing separate group annuities to assume 50% of the underlying benefit obligation subject to certain exceptions. RGA Reinsurance Co. reported $1.90 billion in group annuity direct premiums and considerations in the first quarter, an increase of $1.15 billion from the year-earlier period. In the third quarter of 2022, when Prudential and MetLife Inc. similarly split a $16 billion International Business Machines Corp. pension annuitization, Prudential Insurance Co. of America reported total-filed direct premiums and considerations of $13.98 billion.

Pension risk transfer transactions have traditionally been more common during the second halves of calendar years. Thanks to the Shell USA and Verizon deals, Prudential described the opening three months of 2024 as the strongest ever for the market. With many pension plans fully or overfunded, sponsors may be more eager to transact regardless of when opportunities arise.

Individual annuities

Strong growth in the individual annuity business was much more broad-based in the first quarter. Of the top 50 individual entities in the business line, 37 posted year-over-year growth rates in the double-digits, including the quarter's top-three writers: Apollo Global Management Inc.'s Athene Annuity and Life Co., Allianz SE's Allianz Life Insurance Co. of North America and KKR & Co. Inc.'s Forethought Life Insurance Co.

Other individual entities generated more outsized growth, with registered index-linked annuity specialist Equitable Financial Life Insurance Company of America, Delaware Life Insurance Co., USAA Life Insurance Co., EquiTrust Life Insurance Co. and Protective Life Insurance Co. each posted well over a doubling in writings. Protective's 256.3% growth in individual annuity direct premiums and considerations reflected rapidly accelerating fixed annuity sales. Three-year projections issued by the company in April suggest sales in the retirement segment, which includes the fixed annuity products, will increase at a compound annual rate of 19.9% through 2026.

Athene saw mixed trends across its key individual annuity products, with registered index-linked and fixed indexed annuity sales surging by 45% and 32%, respectively, but multiyear guaranteed annuity sales plunging by 50%. CEO Grant Kvalheim said during a May 9 conference call that Athene opted during the quarter to moderate sales of the latter product, which he described as "purely rate driven." He added that Athene does not expect a material sales impact from the US Department of Labor's final fiduciary rule, which was revealed in April.

Market uncertainty associated with the Labor Department's earlier iteration of a fiduciary rule contributed to consecutive year-over-year declines in individual annuity direct premiums and considerations from the second quarter of 2016 through the end of 2017.

Individual and group life

Direct premium growth rates in the individual and group life lines were positive if not necessarily spectacular in the first quarter at 2.0% and 8.6%, respectively. Individual life market-share leader The Northwestern Mutual Life Insurance Co.'s expansion of 2.7% in the business line marked its year-over-year increase since the third quarter of 2022 and its largest since the second quarter of 2022.

Unlike the brisk tailwinds behind the individual annuity sales, the individual life market faced some headwinds in the first quarter. LIMRA's Preliminary US Retail Individual Life Insurance Sales Summary Report showed 1% declines in overall sales as measured by annualized premium and number of policies, with growth in indexed universal life and term life products offset by weakness in other categories.

Accident and health

The accident and health business also contributed to strong overall US life industry growth as health-focused life subsidiaries of UnitedHealth Group Inc., CVS Health Corp. and The Cigna Group ranked among the six-largest individual entities in the first quarter by direct premium volume. Growth of 8.2% in accident and health direct premiums reported on life statement blanks represented the strongest start to a calendar year for that business since 2015.

More details on trends in the accident and health business across sectors will be released in S&P Global Market Intelligence's 2024 US Accident and Health Market Report, which is expected to be published in early June.

Methodology

Results from statutory filings reflect data obtained by S&P Global Market Intelligence as of May 22, supplemented by the manual addition of data for Prudential Insurance Co. of America. Quarterly statutory filings and related data for New Jersey-domiciled companies such as the Prudential subsidiary are not disseminated by regulators for public review by state statute. Prudential posts select statutory results on its investor relations website, which we incorporated where available.

The industry values referenced in this article reflect S&P Global Market Intelligence aggregates for calendar years. For calendar quarters from the third quarter of 2022 to the fourth quarter of 2023, industry values reflect S&P Global Market Intelligence aggregates supplemented by the addition of Prudential Insurance Co. of America results. For the first quarter of 2024, results reflect the sum of data for individual entities as obtained by S&P Global Market Intelligence from the National Association of Insurance Commissioners, adjusted for the manual addition of Prudential Insurance Co. of America and the exclusion of National Slovak Society Of the USA Inc, a fraternal benefit society whose quarterly statement showed values on Exhibit 1 that were multiples of its historical levels.

Additionally, historical results for the individual and group life and accident and health businesses may reflect comparisons between the line-of-business designations rolled out by the NAIC across schedules and exhibits beginning with 2023 annual statements and those previously utilized. For example, the current accident and health designation was previously broken out as group, other and credit accident and health.

While the data is subject to change upon the receipt of additional information, we would not expect material changes to the industry totals given the size of the remaining entities for which first-quarter 2024 financials are not available. Due to the adjustments and estimates described above, year-over-year percentage changes calculated using S&P Global Market Intelligence industry aggregates, when available, may materially differ from those presented in this article. This is particularly true in any period such as the first quarter in which Prudential Insurance Co. of America booked one or more jumbo pension risk transfer transactions.

^{Article amended May 28 at 10:20 a.m. ET to update year to 2024, "...Prudential described the opening three months of 2024 as the strongest ever for the market."
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.}