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Q2 individual annuity volume dropped more than initial statutory filings showed

The U.S. life insurance industry has suffered its largest decline in direct premiums and considerations since the fourth quarter of 2013 as the macroeconomic fallout from COVID-19 took a toll on business volumes across product lines.

A reduction of nearly 8% in direct premium volume in the second quarter reflected particular softness in the ordinary individual annuity business. Optimism from a cursory review of initial statutory data for the period, suggesting that the decline in the business line was not as severe as feared, dissipated upon one prominent carrier's submission of amended results.

Using the combination of the initial statutory results and an amended Exhibit 1 for Massachusetts Mutual Life Insurance Co. as posted Aug. 24 by the National Association of Insurance Commissioners, S&P Global Market Intelligence estimates that direct ordinary individual annuity premiums and considerations sank by 21.5% for the quarter. That represents the largest decline in more than a decade for a business line that has been characterized by significant quarterly volatility.

When incorporating MassMutual's originally filed results, the industry's rate of decline in the ordinary individual annuity business appeared to have been a much less historically significant slide of 8.6%. Direct ordinary individual annuity premiums and considerations had plunged by greater amounts on six previous occasions in the past 10 years.

Aggregations of second-quarter results in this article reflect the aggregation of year-to-date data reported on Exhibit 1 of statutory filings for those individual companies with June 30 results available for each of the past two years, less the results the same set of companies filed for the first quarter. Results attributable to certain entities that have historically produced the vast majority of their business from outside the U.S. are excluded, consistent with the methodology employed in our annual U.S. life and annuity outlook.

Even after giving effect to the materially lower amended results, MassMutual still produced outsized growth in the ordinary individual annuity business during the second quarter relative to peers. Its direct premiums and considerations in that line surged by 192.2% in the second quarter to a new high of $2.64 billion, a sum that exceeded the company's production in the first three quarters of 2019 combined.

Outside of MassMutual, only four of the other top 25 individual entities in that business line as ranked by second-quarter 2019 direct premiums and considerations generated growth of any amount in the period: New York Life Insurance Co.'s New York Life Insurance & Annuity Corp.; Teachers Insurance & Annuity Association of America; Brighthouse Financial Inc.'s Brighthouse Life Insurance Co.; and Security Benefit Life Insurance Co.

A review of Secure Retirement Institute sales surveys for the past two reporting periods found that MassMutual fell only $17.3 million short of dethroning New York Life in the second quarter as the leading seller of fixed-rate annuities, which include the combination of fixed-rate deferred, fixed immediate, deferred income and structured settlement annuities. Its first-quarter production in that category lagged New York Life by $1.46 billion. For the first half of 2019, MassMutual ranked well behind New York Life, American International Group Inc. and Global Atlantic Financial Group Ltd.

The MassMutual amendment had the inverse effect on the group annuity business, where the estimated industry rate of decline of 5.6% pales in comparison to the retreat of 27.3% as originally filed. Direct group annuity premiums and considerations declined at a faster pace than the estimated figure as recently as the second quarter of 2019; the originally filed value would have marked the largest retreat since the fourth quarter of 2013, when the industry faced an impossible comparison stemming from the timing of two landmark Prudential Financial Inc. pension risk transfer transactions in the year-earlier period.

The effects of the amendment were much more muted in other lines, and it offered no solace to the industry as it pertained to total-filed business volume, given that MassMutual's overall result remains unchanged.

Among the six major lines, only the other accident and health business showed an increase in direct business volume, growing by 5.1% year over year both on an estimated and originally filed basis.

Group accident and health premiums dropped by more than 1.9% for the period, both as estimated and originally filed, which ended a stretch of 13 consecutive quarters of expansion. In the ordinary life business, direct premiums slipped by less than 0.3% as estimated, compared with 0.1% as originally filed. Group life premiums dropped by nearly 8.3% as estimated and 8.9% as originally filed. In all lines, second-quarter growth rates compared unfavorably to those from the first quarter.

For the full year, S&P Global Market Intelligence projected a decline of 10% in ordinary individual annuity business, an increase of less than 3% in group annuity business and a decline of nearly 3% in total volume across the life, annuity and accident and health lines.