Latest news with #KaitlinPiasecki
Business Wire
6 days ago
- Business
- Business Wire
Best's Special Report: Individual Annuity Surrenders Dent Operating Profitability
BUSINESS WIRE)--Increasing surrenders on individual annuities drove a 27% decline in pre-tax net operating profitability despite record sales in recent years, according to a new AM Best report. The Best's Special Report, 'Individual Annuity Surrenders Dent Operating Profitability,' states that surrenders increased by 21% to $280 billion in 2024, up from $232 billion in 2023, as higher interest rates and policyholders' desire for better performing products have led to the uptick. Overall, the individual annuity composite's net operating gain fell to $14.9 billion in 2024, compared with $20.5 billion in 2023. 'With the heightened surrender activity over the last few years, the industry now has nearly half of its individual annuity reserves within surrender charge protection or can't be surrendered at all, compared with an average of 37% between 2014-2021,' said Kaitlin Piasecki, industry research analyst, Industry Research and Analytics, AM Best. On the heels of strong momentum in 2023, annuity sales were solid in 2024, led by variable annuity products such as RILAs. The rapid growth has heightened competition, including new private equity/asset manager-owned insurers looking to capitalize on the difference between the cost of liabilities (i.e., crediting rates on products) and potential investment returns. Many companies in the individual annuity composite also have been utilizing reinsurance to manage their growth and capital levels. According to the report, in the last five years, the amount of reserves ceded to reinsurers has increased by 86%, with the biggest portion moving offshore to affiliates. Private equity/asset manager-owned insurers are the lead drivers behind these assets moving offshore. These companies also drive the trend of utilizing offshore affiliates for reinsurance. 'Ceding to offshore affiliated reinsurers allows insurers to manage capital, transfer risk and save on taxes, but AM Best believes that this reduces transparency and is generally a credit negative for the market,' said Jason Hopper, associate director, Industry Research and Analytics, AM Best. 'Private equity/asset manager-owned insurers now account for about one-quarter of the companies in the individual annuity market, nearly one-third of gross premium written in 2024, but also more than half of the reserves ceded.' The report notes that insurers with private equity/asset manager parents have higher allocations to private placements, asset-backed securities, mortgage loans and affiliated investments than other organizational structures. Insurers also have increased allocations to private credit, which allows for flexibility of structures, although these instruments are bespoke, less transparent and less liquid, which results in a higher risk premium for investors. Looking ahead, while annuity companies' investment incomes were in a favorable position at the beginning of 2025, yields have since declined and equity markets have given back some of their previous returns as economic uncertainty has grown. To access the full copy of this special report, please visit
Yahoo
26-03-2025
- Business
- Yahoo
Best's Special Report: Eligibility Redeterminations Put Pressure on Medicaid Managed Care Segment
OLDWICK, N.J., March 26, 2025--(BUSINESS WIRE)--Eligibility redeterminations in the Medicaid managed care segment following the end of the public health emergency period is leading to a mismatch between acuity and rates, according to a new AM Best report. During the public health emergency from COVID-19, the segment experienced significant enrollment growth in 2020-2022 due to the lack of Medicaid eligibility redeterminations. The Best's Special Report, "Medicaid Redeterminations Put Pressure on Segment," states that since the provision expired on March 31, 2023, and states resumed the process of eligibility redeterminations, Managed Medicaid insurers have seen steep declines in enrollment, with Idaho leading the way with a 38% enrollment drop and 15 other states experiencing a drop of more than 20%. Lagging rate increases have created a mismatch between acuity and pricing. "The majority of disenrolled Medicaid members tended to be healthier members, resulting in higher acuity in the segment," said Kaitlin Piasecki, industry research analyst, AM Best. "Current pricing still reflects the healthier risk pool, and so necessary rate increases have lagged the acuity level and led to margin pressure in the segment." Because of the disconnect between pricing and risk profiles, according to the report, the ratio of incurred claims to direct premium has risen by more than seven percentage points through third-quarter 2024 to 92.0 from the 2020 pandemic low point of 84.8. Managed Medicaid is a high-volume business with narrow margins, and although industry earnings have been consistently positive, margins have been tightening. The report notes that nearly all managed Medicaid filing entities are single-state writers. At year-end 2023, 70% of companies reported a decline in underwriting profitability in their managed Medicaid business. "Profitability may be difficult for some carriers, but many of the well-known health insurers have been challenged before and have demonstrated their ability to withstand difficult operating conditions," said Jason Hopper, associate director, Industry Research and Analytics, AM Best. The segment recorded a $1.8 billion underwriting gain through third-quarter 2024, compared with $5.3 billion for all of 2023. Despite the rate adequacy concerns, managed Medicaid profitability is expected to improve in 2025 and into 2026, as rate increases better reflecting the recent acuity profile and trends for the currently enrolled population are implemented. However, uncertainties related to federal funding cuts to the program remain. To access the full copy of this special report, please visit AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit Copyright © 2025 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED. View source version on Contacts Kaitlin Piasecki Industry Research Analyst +1 908 882 2458 Jason Hopper Associate Director, Industry Research and Analytics +1 908 882 1896 Christopher Sharkey Associate Director, Public Relations +1 908 882 2310 Al Slavin Senior Public Relations Specialist +1 908 882 2318 Sign in to access your portfolio
