LIFE/HEALTH INSURANCE: FINANCIAL RESULTS

While the life insurance industry continued to face challenges from a sluggish economy and low interest rates in 2013 for the second year in a row, operating results and capitalization improved as conditions in the stock market eased, according to a May 2014 report by A.M. Best. Capital, as measured by policyholders' surplus, rose to $331.9 billion in 2013 from $329.0 billion in 2012 according to SNL Financial. The industry’s net gain from operations before federal income taxes rose slightly to $63.7 billion in 2013 or 5.4 percent from $60.5 billion in 2012. Net income rose from $40.9 billion to $43.2 billion during the same period, the highest level in at least a dozen years according to SNL.

LIFE/HEALTH INSURANCE INDUSTRY INCOME STATEMENT, 2009-2013

($ billions, end of year)

2009 2010 2011 2012 2013 Percent change, 2012-2013 (1) Revenue             Life insurance premiums $120.6 $100.3 $122.8 $130.5 $126.1 -3.4% Annuity premiums and deposits 225.5 286.3 327.0 339.9 279.4 -17.8 Accident and health premiums 145.2 150.9 151.3 151.7 153.4 1.1 Credit life and credit accident and health premiums 1.6 1.6 1.6 1.6 1.4 -7.2 Other premiums and considerations 0.5 23.1 2.1 2.2 2.3 4.4 Total premiums, consideration and deposits $493.4 $562.2 $604.8 $626.0 $562.8 -10.1% Net investment income 156.6 164.1 167.3 166.9 167.9 0.6 Reinsurance allowance 61.5 -29.3 -16.3 -30.8 -21.2 -31.0 Separate accounts revenue 20.4 23.4 26.1 29.5 31.4 6.5 Other income 44.9 52.9 53.1 60.3 43.1 -28.6 Total revenue $776.7 $773.3 $835.0 $851.9 $783.9 -8.0% Expense             Benefits 230.1 231.7 239.1 242.0 250.9 3.7 Surrenders 228.7 216.8 237.3 245.7 248.8 1.2 Increase in reserves 99.2 96.2 141.2 83.8 86.2 2.9 Transfers to separate accounts 11.1 29.3 32.4 61.6 -0.8 -101.3 Commissions 48.5 48.9 51.4 52.6 53.0 0.8 General and administrative expenses 52.1 54.7 56.5 57.3 58.5 2.2 Insurance taxes, licenses and fees 7.1 7.5 7.8 8.0 8.2 1.9 Other expenses 7.4 2.2 8.1 6.7 -0.4 -105.6 Total expenses $684.2 $687.3 $773.8 $757.7 $704.5 -7.0% Net income             Policyholder dividends 15.0 15.0 15.1 15.2 15.7 3.2 Net gain from operations before Federal income tax 61.0 53.1 28.0 60.5 63.7 5.4 Federal income tax 10.5 8.6 4.7 9.9 8.6 -13.2 Net income before capital gains $50.3 $44.1 $22.9 $50.3 $55.2 9.6% Net realized capital gains (losses) -28.7 -16.0 -8.5 -9.4 -12.0 27.3 Net income $21.5 $28.0 $14.4 $40.9 $43.2 5.5% Pre-tax operating income 61.0 53.1 28.0 60.5 63.7 5.4

(1) Calculated from unrounded data.

Source: SNL Financial LC.