Latest news with #JasonHopper
Business Wire
6 days ago
- Business
- Business Wire
Best's Special Report: Individual Annuity Surrenders Dent Operating Profitability
BUSINESS WIRE)--Increasing surrenders on individual annuities drove a 27% decline in pre-tax net operating profitability despite record sales in recent years, according to a new AM Best report. The Best's Special Report, 'Individual Annuity Surrenders Dent Operating Profitability,' states that surrenders increased by 21% to $280 billion in 2024, up from $232 billion in 2023, as higher interest rates and policyholders' desire for better performing products have led to the uptick. Overall, the individual annuity composite's net operating gain fell to $14.9 billion in 2024, compared with $20.5 billion in 2023. 'With the heightened surrender activity over the last few years, the industry now has nearly half of its individual annuity reserves within surrender charge protection or can't be surrendered at all, compared with an average of 37% between 2014-2021,' said Kaitlin Piasecki, industry research analyst, Industry Research and Analytics, AM Best. On the heels of strong momentum in 2023, annuity sales were solid in 2024, led by variable annuity products such as RILAs. The rapid growth has heightened competition, including new private equity/asset manager-owned insurers looking to capitalize on the difference between the cost of liabilities (i.e., crediting rates on products) and potential investment returns. Many companies in the individual annuity composite also have been utilizing reinsurance to manage their growth and capital levels. According to the report, in the last five years, the amount of reserves ceded to reinsurers has increased by 86%, with the biggest portion moving offshore to affiliates. Private equity/asset manager-owned insurers are the lead drivers behind these assets moving offshore. These companies also drive the trend of utilizing offshore affiliates for reinsurance. 'Ceding to offshore affiliated reinsurers allows insurers to manage capital, transfer risk and save on taxes, but AM Best believes that this reduces transparency and is generally a credit negative for the market,' said Jason Hopper, associate director, Industry Research and Analytics, AM Best. 'Private equity/asset manager-owned insurers now account for about one-quarter of the companies in the individual annuity market, nearly one-third of gross premium written in 2024, but also more than half of the reserves ceded.' The report notes that insurers with private equity/asset manager parents have higher allocations to private placements, asset-backed securities, mortgage loans and affiliated investments than other organizational structures. Insurers also have increased allocations to private credit, which allows for flexibility of structures, although these instruments are bespoke, less transparent and less liquid, which results in a higher risk premium for investors. Looking ahead, while annuity companies' investment incomes were in a favorable position at the beginning of 2025, yields have since declined and equity markets have given back some of their previous returns as economic uncertainty has grown. To access the full copy of this special report, please visit
Business Wire
30-06-2025
- Business
- Business Wire
Best's Special Report: Bermuda Remains the Largest Offshore Life/Annuity Reinsurance Domicile
BUSINESS WIRE)--Bermuda continues to maintain its role as a driving force in offshore reinsurance, accounting for more than 40% of total ceded reserves for U.S. life-annuity writers in 2024, according to a new AM Best report. The newly issued Best's Special Report, titled 'Bermuda Remains the Largest Offshore Life/Annuity Reinsurance Domicile,' also notes that the island nation accounted for over 60% of reserves ceded for L/A transactions effective in 2023 and 2024. However, the growth in ceded reserves from U.S. L/A insurers slowed to 6.4% in 2024, compared with over 10% growth in each of the previous three years. 'Bermuda has a long history of reinsurance regulator accessibility, along with solid networks of legal, actuarial and accounting expertise,' said Jason Hopper, associate director, AM Best. 'Capital efficiency tends to be cited as the primary business rationale for using offshore reinsurance.' The report cites the aging U.S. population and higher interest rates as drivers in the strong annuity growth over the past two plus years. While the growth tapered off in 2024, it is expected to continue, and more companies may look to reinsurers to manage growth and capital levels. Affiliated offshore reinsurance can provide country- risk diversification and capital-efficiency, which supports balance sheet growth. Yet it can also provide accounting and tax benefits. 'However, cross-border reinsurance introduces operational complexity and opaqueness, which may complicate analysis,' said Jacob Conner, associate analyst, AM Best. According to the report, nearly 70% of reserves ceded offshore go to affiliates. Companies with asset manager/private equity sponsors comprise 46% of reserves ceded to offshore affiliates. The report also includes data on U.S. life/annuity insurers, detailing the highest share of in-force ceded reserves offshore affiliates, a breakdown of in-force reserves assumed by region and a ranking of the largest reinsurance transactions for ceded reserves in 2024. To access the full copy of this special report, please visit
Business Wire
24-04-2025
- Business
- Business Wire
Best's Special Report: Secondary Perils Continue to Spike Insurer Loss Ratios, Even in Less Catastrophe-Prone States
BUSINESS WIRE)-- AM Best data shows that nearly half of all U.S. states saw its highest single-year property catastrophe loss ratio in the last 10 years exceed its 10-year median loss ratio by more than 20 percentage points. While many of these states are prone to catastrophe losses, according to a new AM Best report, the rising frequency of secondary perils in states considered to be less-catastrophe prone have led insurers to ramp up reassessments of their pricing models, underwriting strategies and risk management approaches. The rising frequency of secondary perils in states considered to be less-catastrophe prone have led insurers to ramp up reassessments of their pricing models, underwriting strategies and risk management approaches. Share Secondary perils have become a major cause of loss in the past five years for U.S. property/casualty insurers with property catastrophe-exposed lines of business, highlighted by the January wildfires in California. In its Best's Special Report, 'US Weather Event Risks Highlight Need for Stress Testing,' AM Best states that insurers will need to stress test for these threats regularly as risk profiles evolve. Stress tests are conducted and factored in AM Best's credit rating process, as part of the balance sheet and enterprise risk management assessments. 'Stress testing should consider risk appetite and tolerance, as well as net exposure, the impact from multiple events, liquidity and reinsurance structure and dependence,' said Jason Hopper, associate director, Industry Research and Analytics. 'Understanding true exposures and considering all plausible scenarios is important. With the availability of aggregate reinsurance protection limited, some carriers have been severely impacted by the aggregation effects of multiple, smaller events.' The report notes that there were 27 one-billion-dollar weather events in 2024, and 28 in 2023 (despite there being no NOAA-named hurricane), compared with an average of 15 events in 2010-2022. While national insurers have accounted for an overwhelming majority of direct losses paid, single-state and regional companies tend to have a greater share of claims compared with their premiums in some states, with Kentucky being the highest in 2023 at nearly 25% of direct losses paid in the state while having 18% in market share based on direct premiums. The greater share of claims than premiums indicates higher concentration risk for these carriers. 'Market disruptions continue as some of the national carriers curb their risk appetites, creating opportunities for single-state and regional writers,' said Jacob Conner, associate analyst, AM Best. 'However, the operating loss-drag on capital and surplus over the last 10 years has been worse for single-state and regional writers in catastrophe-prone states, and so stress testing helps companies determine the strength of the balance sheet and ability to absorb shocks.' To access the full copy of this special report, please visit
Yahoo
24-04-2025
- Business
- Yahoo
Best's Special Report: Secondary Perils Continue to Spike Insurer Loss Ratios, Even in Less Catastrophe-Prone States
OLDWICK, N.J., April 24, 2025--(BUSINESS WIRE)--AM Best data shows that nearly half of all U.S. states saw its highest single-year property catastrophe loss ratio in the last 10 years exceed its 10-year median loss ratio by more than 20 percentage points. While many of these states are prone to catastrophe losses, according to a new AM Best report, the rising frequency of secondary perils in states considered to be less-catastrophe prone have led insurers to ramp up reassessments of their pricing models, underwriting strategies and risk management approaches. Secondary perils have become a major cause of loss in the past five years for U.S. property/casualty insurers with property catastrophe-exposed lines of business, highlighted by the January wildfires in California. In its Best's Special Report, "US Weather Event Risks Highlight Need for Stress Testing," AM Best states that insurers will need to stress test for these threats regularly as risk profiles evolve. Stress tests are conducted and factored in AM Best's credit rating process, as part of the balance sheet and enterprise risk management assessments. "Stress testing should consider risk appetite and tolerance, as well as net exposure, the impact from multiple events, liquidity and reinsurance structure and dependence," said Jason Hopper, associate director, Industry Research and Analytics. "Understanding true exposures and considering all plausible scenarios is important. With the availability of aggregate reinsurance protection limited, some carriers have been severely impacted by the aggregation effects of multiple, smaller events." The report notes that there were 27 one-billion-dollar weather events in 2024, and 28 in 2023 (despite there being no NOAA-named hurricane), compared with an average of 15 events in 2010-2022. While national insurers have accounted for an overwhelming majority of direct losses paid, single-state and regional companies tend to have a greater share of claims compared with their premiums in some states, with Kentucky being the highest in 2023 at nearly 25% of direct losses paid in the state while having 18% in market share based on direct premiums. The greater share of claims than premiums indicates higher concentration risk for these carriers. "Market disruptions continue as some of the national carriers curb their risk appetites, creating opportunities for single-state and regional writers," said Jacob Conner, associate analyst, AM Best. "However, the operating loss-drag on capital and surplus over the last 10 years has been worse for single-state and regional writers in catastrophe-prone states, and so stress testing helps companies determine the strength of the balance sheet and ability to absorb shocks." To access the full copy of this special report, please visit 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 © 2025 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED. View source version on Contacts Jason Hopper Associate Director, Industry Research and Analytics +1 908 882 1896 Jacob Conner Associate Analyst +1 908 882 2465 Christopher Sharkey Associate Director, Public Relations +1 908 882 2310 Al Slavin Senior Public Relations Specialist +1 908 882 2318 Sign in to access your portfolio
Associated Press
17-04-2025
- Business
- Associated Press
Best's Special Report: Implications of Business Profiles on Operating Performance
OLDWICK, N.J.--(BUSINESS WIRE)--Apr 17, 2025-- While an insurer's business profile has a foundational role in its earnings stability and surplus growth, concentration by line of business and geography can be key detriments to a respective company's profitability, according to a new report released by AM Best. In its new Best's Special Report, 'Implications of Business Profiles on Operating Performance,' AM Best notes that this concentration aspect is the greatest drag on its business profile assessments, which serve as a key building block in the rating process. Nearly 60% of AM Best-rated U.S. property/casualty (P/C) companies have a concentration sub-assessment of negative, with degree of competition (31%), market position (22%) and product risk (22%) following as less impactful factors. According to the report, there has been a shift in the risk profiles of individual states due to secondary perils, which have become a major cause of insured losses. 'Insurers operating in fewer states or with fewer lines may face greater challenges managing the financial impact of these perils than national insurers that can better diversify their risk,' said Jason Hopper, associate director, AM Best. Approximately 50% of AM Best-rated companies with a limited business profile have their largest concentration in California, New York, Florida and Texas. P/C companies domiciled in these four states accounted for nearly 35% of this segment's downgrades from 2021 through 2024. Concentrations, whether by product or geographic, can lead to heightened climate risk, event risk, limited flexibility, earnings volatility, capital pressure and regulatory risk. However, the report also notes that higher business profile assessments generally correlate with stronger operating performance assessments, demonstrated by a gradual decline in return on revenue and higher volatility in results as business profile assessments worsen. To access a complimentary copy of this special report, please visit © 2025 by A.M. Best Rating Services, Inc. and/or its RIGHTS RESERVED. View source version on CONTACT: Jason Hopper Associate Director Industry Research & Analytics +1 908 882 1896 [email protected] Christopher Sharkey Associate Director, Public Relations +1 908 882 2310 [email protected] Doniella Pliss Director +1 908 882 2245 [email protected] Al Slavin Senior Public Relations Specialist +1 908 882 2318 [email protected] KEYWORD: EUROPE UNITED STATES NORTH AMERICA NEW YORK NEW JERSEY INDUSTRY KEYWORD: PROFESSIONAL SERVICES INSURANCE BUSINESS FINANCE SOURCE: AM Best Copyright Business Wire 2025. PUB: 04/17/2025 08:52 AM/DISC: 04/17/2025 08:52 AM
