The entryway to Moody's offices in New York, taken around 2016 (Photo: Allison Bell/ALM)

The U.S. life insurance and life reinsurance operating companies that Moody’s Investors Service rates produced just $27 billion in statutory net income in 2018, but they sent $30 billion in dividends upstream to their parent companies.

The life companies’ total dividend payments exceeded their total statutory net income for the first time since 2011, according to Manoj Jethani and other Moody’s analysts.

(Related: Capital Blue Defends Reserves)

The Moody’s analysts have published those figures in a new look at U.S. life insurers’ and life reinsurers’ capital levels.

The analysts based the net income and dividend figures on proprietary data from SNL Financial LC.

The analysts use the term “operating company” to refer to the licensed life insurance companies and life reinsurance companies that actually write the coverage.

In most cases, the big operating companies are the subsidiaries of top-level companies that, technically, are simply “holding companies,” not life insurance companies

Total operating company dividends increased in 2018 partly because units of Aflac Inc. paid $12 billion in dividends, due to a structural reorganization. The units “upstreamed” just $2 billion in dividends to their parent in 2017, according to the Moody’s analysts.

The analysts note that, since 2009, the level of statutory dividends as a percentage of total statutory net income has generally been rising.

“A primary use of this upstreamed cash has been returning capital back to shareholders, in the form of common share buybacks and increasing common stockholder dividends,” the analysts write.

The analysts note that, in most years, capital and surplus as a percentage of total assets has also been rising.

In 2018, the median risk-based capital (RBC) level for the rated life insurers and life reinsurers was 447%, with a range from 208% to 721%.

— Read Demutualization Can Cut Risk For Insurers, S&P Says, on ThinkAdvisor.

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