Credit ratings agency Moody’s reported that publicly traded U.S. life insurers posted solid but uneven operating profits in the fourth quarter of 2025 as the boost from rising interest rates faded and yields stabilized.
While results were generally positive compared to the prior year, sequential results were weakened for some companies due to tighter spreads on certain annuity products and higher claims in specific product lines. Earnings remain supported by retirement solutions, asset management and other capital-light businesses.
Insurers continue to benefit from reinvestment yields that exceed traditional investment portfolios, even as the additional boost from rising interest rates has largely faded. Mortality rates have returned to more typical levels, while results for disability and group benefits show larger changes.
Moody’s expects industry-wide earnings to remain broadly stable through 2026, driven by changes in product mix, capital management and cost control.
The Moody’s-rated insurer’s total operating income fell 14% month-on-month but increased 7% year-on-year. This decline reflects interest rate normalization, tighter spreads on select annuities, and a more typical benefit experience. Equity market and reinvestment returns continued to support results, while pension risk transfer activity and retirement-oriented products helped offset weaker results in interest-rate sensitive or capital-intensive product lines.
Investment income was stable month-on-month, slightly higher than the same period in 2024. Alternative asset performance was mixed, with private credit performing well and commercial real estate, particularly office holdings, lagging. Capital deployment slowed as insurers focused on balance sheet efficiencies, reinsurance and capital-light growth while maintaining strong free cash flow and disciplined shareholder distributions.
Moody’s said U.S. stocks rose strongly in 2025, with the S&P 500 near record highs and volatility remaining moderate. Insurers with significant asset management businesses, such as Equitable Holdings, Inc., Principal Financial Group, Inc., Ameriprise Financial, Inc. and Voya Financial, Inc., benefited from increased assets under management, positive net inflows and rising performance fees.
By the end of 2025, the U.S. 10-year Treasury bond yield will remain in the mid-4% range. Moody’s expects yields to remain in the 4%–5% range in 2026 as the yield curve normalizes and monetary easing gradually advances. While higher interest rates continue to support spread-based products and investment income, they also create disintermediation risks, particularly for interest-rate sensitive liabilities. Insurers have mitigated this problem through portfolio diversification, liability management, and a shift to less interest-rate sensitive products.
Foreign exchange movements hit earnings for insurance companies with large international operations. The U.S. dollar weakened against major currencies until 2025 and then stabilized, with the Japanese yen’s movements particularly noticeable. Moody’s stressed that foreign exchange remains a source of quarterly volatility for insurers such as MetLife, Aflac Incorporated and Prudential Financial, Inc., although hedging programs and diversified exposures can help manage these effects.
Pension risk transfer activity was strong during the quarter, with demand high from plan sponsors seeking to reduce liability risk. Principal Financial Group, Inc. reported significant transaction flows, while MetLife, Inc. executed significant trades in the United States and the United Kingdom. Corebridge Financial, Inc. also noted an increase in institutional reserves for PRT and guaranteed investment contracts, a trend Moody’s expects to continue into 2026.
The Moody’s-rated insurer’s fourth-quarter net profit reached $8.3 billion, up from the previous quarter but down from fourth-quarter 2024 levels. Earnings were mainly driven by strong investment income, with higher yields and stock market performance offsetting mixed underwriting performance. While commercial real estate risks remain a concern, alternative investments have made a positive contribution in some cases.
Individual life insurance sales were weak, declining both sequentially and year-over-year, but results varied across companies. Globe Life, Inc. reported premium growth due to an expanding agent network, while Primerica, Inc. reported softer sales due to capacity pressures. Despite softer sales, Lincoln National benefited from improved mortality rates and returns on alternative investments.
Growth in annuities has focused on products that offer market-linked upside and downside protection, particularly registered index-linked annuities (RILAs) and fixed-index annuities. Companies such as Prudential Financial, Inc., Corebridge Financial, Inc. and Lincoln National Corporation have emphasized a shift toward capital-efficient, less sensitive products. Industry forecasts cited by Moody’s show total annuity sales rising year-over-year and index products gaining market share.
Supported by profitability and continued balance sheet optimization, shareholders’ equity remained broadly stable and increased compared with the same period last year. Moody’s highlights that many insurance companies continue to divest interest-sensitive businesses, reinsure legacy investment portfolios, and expand capital-light businesses to enhance flexibility and predictability. Shareholder returns through dividends and buybacks remained tight and broadly in line with previous years.
Japan remains an important but volatile market. Aflac Incorporated’s premiums fell slightly but benefit ratios improved, while Prudential Financial, Inc. faced operational disruptions and a temporary halt in new sales that are expected to impact 2026 earnings. MetLife, Inc.’s overall results in Asia were relatively stable.
Artificial intelligence is increasingly being used to improve operational efficiencies, particularly in underwriting, claims and customer service, rather than as a primary growth driver. Companies such as Voya Financial, Inc., Aflac Incorporated, and Primerica, Inc. have accelerated their adoption of artificial intelligence to optimize costs and workflows. Technology exposure in the portfolio remains limited and diversified.
In short, Moody’s assesses that although the one-time gains from rising interest rates have disappeared, the profit prospects of U.S. life insurance companies entering 2026 will be basically stable. Profitability will increasingly depend on prudent product positioning, disciplined capital management and the ability to respond to changing economic, market and competitive conditions.
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