Investments and higher sales of life annuities impact insurance company profits

Insurers’ profits began with a drop in the first three months of 2022 compared to those achieved last year, which is considered “extraordinary” by the sector.

According to figures from the Association of Insurers, and considering the general and life branches, insurance companies totaled profits of $313,574 million during the first quarter of this year, which shows a drop of 31.3% when compared to those achieved in the same period last year.

According to the data, one of the main factors that explained the decline was the contraction suffered by the profitability of the industry’s investments.

This is because in the first three months of the year the result of investments was $584,941 million, which resulted in a negative variation of 30% in 12 months.

“The result of the investments was not as good as it was last year. In 2021 there was an increase and this quarter there was an impact due to the war between Russia and Ukraine, ”says an industry executive.

Higher sales of life annuities

On the life side, profit was $288,810 million, which left a drop of 30%. In this branch, the largest amount of life annuity sales that has been registered in recent months also had an impact.

During the first quarter, and according to data from the Commission for the Financial Market, 4,884 units of these pension policies were sold, which is a 113% increase compared to the 2,292 that were granted in the same period of 2021.

The more life annuities a life insurance company sells, the greater the resources that the insurer must allocate for technical reserves that will guarantee the payment of pensions under this modality, generating an impact on profits.

“Sales of life annuities were higher during the first quarter, and that generates losses for companies, since a reserve must be generated,” says the general manager of an insurance company in the business.

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