Kligerman Sees Gain In 3Q Life Profits, 15% Gain In 3Q VA Sales

But Kligerman also believes that changes in split-dollar life insurance tax regulations and uncertainty about the laws governing estate taxes and corporate-owned life insurance hurt life sales during the third quarter.

The 10-year treasury yield rose more than 0.80 percentage points from historic lows in mid-June, to 3.96% at the end of the third quarter. The shift is easing pressures on insurers’ portfolio yields, spreads and fixed annuity sales, Kligerman says.

Although rates are bouncing back up, older notes and bonds that carry much higher interest rates are constantly maturing. As the old debt securities mature, insurers are having to reinvest the assets in investments that carry lower rates, and that is continuing to put pressure on fixed-rate portfolio yields and spreads, Kligerman says.

Falling yields on fixed-rate portfolios will continue to hurt the profitability of traditional life insurance, long term care insurance, disability insurance and other products that are backed largely by fixed-rate investments, Kligerman writes.