Life Insurance, Annuities: Industry's Largest Investment Capital Sources
March 18, 2012 by N/A
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Los Angeles, CA(PRWEB) March 17, 2012
According to the Federal Reserve, the Life Insurance and Annuities industry is one of the largest sources of investment capital in the United States. As a major source of capital, businesses, governments and organizations rely on life insurers to expand operations or finance transactions. “At the same time, life insurers’ primary responsibility is to their policyholders; they offer services and products related to wealth preservation, retirement savings and estate planning,” said IBISWorld industry analyst Sophia Snyder. The magnitude of invested assets highlights the industry’s exposure to the financial market sector. As a result, revenue has been decimated by the subprime mortgage crisis and financial market collapse. Revenue declined at an average annual rate of 6.2% to $745.6 billion in the five years to 2012.
The decline in revenue is largely attributed to investment losses, but a drop in income from premiums also hurt the industry. As unemployment rose and disposable income diminished, demand for individual policy coverage weakened. Similarly, the rise in unemployment diminished sales of group coverage. Investment income continued to fall due to the industry’s exposure to real estate investments, mortgages and other debt-related securities. As a result, revenue fell about 12.4% in 2010. In 2011, however, the declines started to reverse, and revenue in 2012 is expected to increase 1.4%. Further, the number of employees is starting to creep upward. Revenue is projected to increase in 2013 as the industry benefits from higher interest rate returns on bonds and other debt-market securities. Beyond this one-year gain, industry growth will remain restrained over the majority of the next five years, hampered by persistent unemployment. Investment income is also expected to be modest compared with pre-2008 levels as firms attempt to lower financial risks and improve stability.
The US Life Insurance and Annuities industry has low market concentration, as the top four life insurers in the United States account for about 11.8% of industry revenue in 2012. The four main types of life insurers in the United States include stock-owned entities, mutual companies, fraternal organizations and federal agencies. However, most life insurers are organized as either stock (75.4% of firms) or mutual companies (14.0%). Stock life insurers issue stock and are owned by their stockholders, while mutual companies are legally owned by their policyholders and consequently do not issue stock. According to Snyder, stock life insurance companies can be owned by a variety of investors, including individual investors, institutions, corporations, other life insurance companies and even mutual firms. As a result, these entities tend to be less risk-averse in comparison to mutual companies, as the diverse ownership base is generally more concerned with profit margins and stock appreciation than financial stability. For more information, visit IBISWorld’s Life Insurance and Annuities report in the US industry page.
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IBISWorld industry Report Key Topics
Operators within this industry are primarily engaged in accepting liability under annuities and life, disability income and accidental death and dismemberment insurance policies. Enterprises within this industry include fraternal organizations, privately held insurers, publicly traded insurers and mutual insurance companies.
Industry Performance
Executive Summary
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Current Performance
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Major Markets
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Market Share Concentration
Key Success Factors
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About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.
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