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11 Jan, 2024

US life insurance 2024

outlook: Rising interest
rates to boost investment
income
 

Author Hailey Ross, Kris Elaine Figuracion

Theme Healthcare & Pharmaceuticals, Real Estate, Banking, Fintech, Insurance

US life insurers are expected to see a benefit to investment income amid

high interest rates in 2024, but investors will likely still be watching for
potential issues related to their commercial real estate portfolios.

The 10-year Treasury yield, which serves as a benchmark for insurers' new
money yields, has been growing over the past couple of years. As of Dec. 29,
2023, the 10-year Treasury yield sat at 3.88%, an increase from 1.63% at
the start of 2022.

In an interview, CreditSights analyst Josh Esterov pointed out that new

money rates are "well ahead" of insurers' portfolio book yields despite the
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"That's going to be a medium- to long-term kind of tailwind for the
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More 2024 trends

Life insurers' commercial real estate portfolios have been a hot topic,
particularly as the market for office space saw challenges in 2023.
Concerns over exposure persist even though company executives have
used earnings calls to try and assure investors that any potential problems
in commercial real estate are manageable.

Enhanced scrutiny of growing private-equity investment into the insurance

space may also be on the docket in 2024. In the Financial Stability
Oversight Council's 2023 annual report, the council noted the increasing
influence of new entrants in the life insurance space including private
equity and alternative asset managers.

"The Council recommends that [the Federal Insurance Office], along with
the National Association of Insurance Commissioners (NAIC), work with
member agencies to evaluate the potential impact of these trends on
systemic risk and associated financial stability considerations," the report
said.

In 2024, the life insurance industry will also have to contend with
developments around a fiduciary rule proposed by the US labor
Department. The rule would update the definition of an investment advice
fiduciary under the Employee Retirement Income Security Act and would
also lower what it calls investment "junk fees" that consumers pay when
purchasing retirement products.

During a mid-December 2023 hearing, insurance industry trade groups

voiced strong opposition to the rule, arguing that regulations already in
place are adequate, among other things. At least one insurance
commissioner has also expressed displeasure with the proposed rule.
The 60-day comment period for the proposed rule was scheduled to close
Jan. 2.

Top players

Heading into 2024, Metlife was the largest life insurance company based
out of the US and the seventh largest globally in 2023. The company also
landed a spot as the second-worst performing US life insurance stock in
2023 with its shares dropping around 7.5% for the year.

Meanwhile, The Northwestern Mutual Life Insurance Co., MetLife Inc. and
New York Life were the largest US life insurers in terms of premiums,
according to data compiled by S&P Global Market Intelligence.

Through the first nine months of 2023, the vast majority of Northwestern
Mutual's $13.30 billion direct premiums came from individual life business.
Metlife saw $11.45 billion in total direct premiums during the same time
period, with $9.55 billion coming from group life business. New York Life
followed closely behind with $11.13 billion in total direct life premiums.
Meanwhile, Athene Holding Ltd. was the top US annuity writer with a total of
$31.42 billion in combined direct individual and group annuity
considerations reported in the first nine months of 2023. Athene also saw
the largest year-over-year change with 34.4% growth in the same time
period.
Massachusetts Mutual Life Insurance Co. and Corebridge Financial Inc. had
the second- and third-highest amount of combined direct individual and
group annuity considerations, reporting $20.6 billion and $17.07 billion in
total considerations, respectively.

In a note, Moody's Investor Services classified the US life sector as being

"stable" for this year noting that the higher interest rates "support portfolio
yields" as well as a "robust sales pipeline" for certain products such as
fixed-rate deferred annuities.
"The influx of private capital in the sector will raise asset risk, and insurers
will face credit deterioration over the next several years in their sizable
commercial real estate portfolio," Moody's said.