Life insurers’ aggregate net income in 2012 fell 22 percent compared with 2011, according to new research.
Moody’s Investors Service, New York, publishes this finding in a special March 2013 survey of U.S. life insurers fourth quarter 2012 results.
Aggregate net income for the 18 life insurers surveyed by Moody’s in fiscal year 2012 totaled $15.8 billion, down from $20.2 billion in fiscal year 2011, a 22 percent decline. For the quarter, however, net income totaled $3.6 billion, up from the $3.3 billion posted in the fourth quarter of 2011.
Contributing to the decline for the fiscal year, Moody’s reports, were year-over-year decreases in net income of $3 billion and $5 billion, respectively, posted by Prudential Financial and MetLife. Prudential reported $2.8 billion in after-tax charges related to net realized investment losses and related charges. A $1.6 billion after-tax goodwill impairment of MetLife’s U.S. retail annuities accounted in part for the company’s drop in net income.
The Moody’s report attributes the quarter-over-quarter improvement in net income in part to increases in Lincoln National’s Corp.’s and Unum Provident Corp.’s fourth quarter results. LNC’s net operating income in the fourth quarter totaled $310 million, up from the $277 million posted in the year ago-period. Unum recorded a net income in the fourth quarter of $225 million, a reversal of the $369 million loss posted in the fourth quarter of 2011.
Both companies posted “large charges” on their 2011 income statements. However, the larger declines reported by Prudential and MetLife “overshadowned” LNC’s and Unum’s results.
“The uneven improvements in life insurers’ net income from quarter to quarter during 2012, influenced by charges related to low rates, DAC/goodwill write-downs or higher claims experience point to the industry’s vulnerability and volatility and the likelihood that recovery and real growth will continue to slow and unsteady throughout 2013,” the report states.
Other highlights from the Moody’s report include:
● Aggregate operating earnings increased 11 percent to $24 billion, helped by greater fee income and higher asset prepayments that boosted investment income.
● Fixed annuity sales dropped by 46 percent in 2012, highlighting the continued adverse impact of low interest rates.
● Aggregate individual life sales declined two percent in 2012 compared with the prior year as insurers raised prices and shifted to more capital-efficient products.