The AIG Effect: Statutory Insurance Results for All Top 30 U.S. Life Groups, SNL Financial Finds “Significant Distortion” to Overall Results

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SNL Financial report shows more favorable market conditions on the horizon with increased stability and consumer confidence up, however AIG’s impact to the market remains undeniable.

Capitalization in the statutory life insurance industry continues to show signs of improvement, but insurance giants like AIG, MetLife and Prudential, among others, still have ground to make up to return to their pre-financial crisis levels, specifically in premiums and annuity considerations.

  • More favorable market conditions, for various types of investments, have narrowed net realized capital losses leading to an increase in after-tax net income in 2010 for the top 30 life groups.
  • Direct premiums & annuity considerations increased by 0.34%; but while the industry-level increase was fairly modest in both categories, the changes by the various groups tended to much more material.
  • AIG reported the largest year over year increase in first-year premiums for total life, annuity and A&H which is directly due to its leading distributor of SunAmerica annuities lifting its two-year suspension on such activities. However they have a ways to go to get back to pre-crisis figures.
  • The AIG effect was most visible in the combination of aggregate write-ins for surplus gains of $45.03 billion for the 30 life groups, up from $5.80 billion in 2009. AIG accounted for approximately $44 billion in those write-ins, attributable to what several AIG companies characterized as a permitted practice approved by regulators in conjunction with the "unique circumstances" related to their participation in AIG's securities lending program.

More Details:
Twenty-two of the 30 largest U.S. life insurance groups, based on net total assets and as consolidated by SNL, reported higher after-tax net income in 2010, helping to fuel continued improvement in industry capitalization. But only 12 of the 30 life groups reported year-over-year improvement in pretax, post-policyholder dividend operating income, highlighting the significant divergence in top- and bottom-line performance across the industry. Of those 30 groups, which account for more than 80% of the U.S. life industry's total assets, the industry aggregate saw pretax earnings plunge by 25.2%, down to $34.26 billion in 2010. After-tax net income, conversely, increased 25% to $18.31 billion as net realized capital losses narrowed to $12.59 billion from $24.84 billion in 2009 and federal and foreign income taxes fell 46.7% to $3.36 billion. Policyholder dividends increased only slightly, by 0.5%, to $13.72 billion in 2010.

A closer look at the various other items contributing to changes in the combined surplus level for the 30 life groups finds that noise associated with the AIG life group provided significant distortion to the overall results. The AIG effect was most visible in the combination of aggregate write-ins for surplus gains of $45.03 billion for the 30 life groups, up from $5.80 billion in 2009. AIG accounted for approximately $44 billion in those write-ins, attributable to what several AIG companies characterized as a permitted practice approved by regulators in conjunction with the "unique circumstances" related to their participation in AIG's securities lending program.

The AIG life group also made outsized negative contributions to the overall change in net unrealized capital gains or losses and paid-in surplus, which effectively served to offset the write-ins.

When excluding the AIG life group from the aggregation, the combined year-end 2010 surplus for the other 29 large life groups amounted to $200.5 billion, up 5.6% year over year. The combination of $17.6 billion in net income and a $5 billion positive change in net unrealized capital gains and losses helped offset $10.5 billion in dividends to stockholders and a negative $7 billion change in the asset valuation reserve.

For additional data and information from SNL Financial’s full 2010 statutory financial results for all of the top 30 life groups, contact Christina Twomey, Public Relations, 434-951-9614 or ctwomey(at)snl(dot)com.

SNL’s statutory data includes detailed financial data on each filer, reinsurance, investment and loss reserve schedules, data by state and line of business and hundreds of ratios, snapshots and analytics, available exclusively as part of SNL Unlimited service for Financial Institutions. SNL is the only information provider to offer clients a comprehensive insurance product, linking statutory data with public company data, mergers & acquisitions data, proprietary news, documents and more.

About SNL Financial
SNL Financial is a leading provider of financial information on more than 3,300 public companies and 50,000 private companies in the business sectors critical to the global economy: Banking, Financial Services, Insurance, Real Estate, Energy and Media & Communications. The SNL information service integrates breaking news, comprehensive data and expert analysis into an electronic database available online and updated around the clock. For more information, visit http://www.snl.com.

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Christina Twomey

Christina Twomey

434-951-6914
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