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ALIRT Report: Favorable Markets, Interest Rates Fuel Industry Earnings

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Continued appreciation in equity markets and a lack of major movement in interest rates helped propel life insurance company statutory earnings and capitalization in the first quarter of 2011, a new report finds

ALIRT Insurance Research LLC, Windsor, Conn., published this finding in a summary of results from a survey that covers financial trends in the life insurance industry. Among the report’s findings:

–Total surplus rose 2.4% in the first quarter 2011 (annualized rate of 10.0%), reflecting continued strong statutory earnings, which offset nominal net capital losses ($39 million) and lower shareholder dividend levels in comparison to previous years.

–Returns on equity and assets were comparable to full-year 2010 levels. The report attributes the result to favorable equity markets, as variable product writers were able to release reserves relating to living and death benefits with the rising stock markets.

–Low interest rates continue to depress investment results, with net yield falling to an annualized rate of 5.18% for the first quarter 2011. Net total return was only slightly lower, owing to the modest net capital losses.

–Direct premiums written rose an annualized 6.5% in the first quarter 2011, an improvement from a more modest increase in 2010 and a sharp decline in 2009.

–Warren S. Hersch


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