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AM Best Update

Ken Frino – Managing Director, AM Best 

Mike Porcelli – Senior Director, AM Best

Presentation to the Federal Insurance Office

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

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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

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Source: AM Best data and research

-30,000

-20,000

-10,000

0

10,000

20,000

30,000

40,000

-30,000

-20,000

-10,000

0

10,000

20,000

30,000

40,000

8-Quarter Rolling Average ($ millions)

($ millions)

Source: AM Best data and research

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

Unrealized Stocks & Bonds YTD 8-Quarter Rolling Average
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High Risk Exposure

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0

10

20

30

40

50

60

70

80

90

 -

 100

 200

 300

 400

 500

 600

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

%

High Risk Assests ($ Billions)

Sch. BA Derivatives Bonds Real Estate Mortgages High risk/total capital % High risk/inv assets %

US Life/Annuity - High Risk Asset Exposure
Q&A
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