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AM Best Update

Ken Frino – Managing Director, AM Best 

Mike Porcelli – Director, AM Best

Presentation to the Federal Insurance Office

March 29, 2023
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Market Segment Outlook – US Life & Annuity

2

AM Best is maintaining a Stable outlook for the US Life & Annuity 

segment, based on the following factors:

• High levels of risk-based capitalization and favorable earnings

• Strong liquidity profiles

• Product de-risking and regular stress testing as part of improvements to risk 

management practices

• Pricing discipline, with robust sales of new business in both life and annuity 

products
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Market Segment Outlook – US Life & Annuity

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Factors partially offsetting these positives include the following:

• Market volatility in the US and global economies, including rapidly rising 

interest rates and inflation

• Significant exposures to structured securities, private debt and real estate

• The war for talent amid labor shortages and flexible work alternatives

• Legacy liabilities in risky product offerings, including long-term care, 

universal life with secondary guarantees and variable annuities with living 

benefits 
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US Life/Health Rating Activity

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US Life/Health – Issuer Credit Rating Activity

% of all Rating Units, 2020

Under Review, 2.8% Upgrades, 8.6%

Downgrades, 3.1%

Initial Ratings, 

1.5%

Total Affirmations, 84.0%

Under Review, 7.2%

Upgrades, 10.5%

Downgrades, 4.6%

Initial Ratings, 

2.0%

Affirmations, 75.7%

Source: AM Best data and research

US Life/Health – Issuer Credit Rating Activity

% of all Rating Units, First Half 2022
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Balance Sheet – Unrealized Gain/Loss

5

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

-30,000

-20,000

-10,000

0

10,000

20,000

30,000

40,000

8-Quarter Rolling Average

($ millions)

US Life/Annuity – Bond and Stock Unrealized Gains/Losses, 4Q20-3Q22 

Unrealized Stocks & Bonds YTD 8-Quarter Rolling Average

Source: AM Best data and research
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High Risk Exposure

54

56

58

60

62

64

66

68

70

72

0

50

100

150

200

250

300

350

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

% of C&S

High Risk Assets ($ Billions)

L/A Industry – High Risk Asset Exposure

High Risk Assets High Risk Assets/ Total Capital & Surplus

Source: AM Best data and research

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Q&A
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