Large North American life insurers posted resilient first-quarter results in 2026, but the headline numbers mask a more complicated picture shaped by geopolitical disruption, mark-to-market losses and intensifying scrutiny of the private credit assets that have become central to the sector's investment strategy.
A new analysis by Morningstar DBRS covering a select group of the ten largest non-mutual life insurers in the US and Canada by premium volume and capitalization found that average adjusted earnings increased 10% quarter over quarter. The group includes Aflac, Athene Holding, Brookfield Wealth Solutions, Corebridge Financial, Global Atlantic, Great-West Lifeco, Manulife Financial, MetLife, Prudential Financial and Sun Life Financial.
Reported net income, however, remained below adjusted earnings across the group, reflecting unfavorable mark-to-market movements on invested assets and derivative hedges. The divergence was most pronounced among US annuity writers with significant exposure to interest-sensitive fixed-income portfolios.
Higher investment yields, improved underwriting results and continued strength in retirement, wealth and asset management businesses all supported earnings, with increased scale contributing to higher fee and spread-based income. Rising operating expenses partially offset those gains.
Morningstar DBRS noted that Q1 2026 was characterized by heightened market fluctuations driven largely by the conflict in the Middle East and its effect on investor sentiment.
Despite having very little direct insurance or asset management exposure to the region, North American life insurers felt the effects through broader global capital markets, with disruptions to oil and gas exports contributing to upward pressure on inflation and interest rates, according to Insurance Business Canada.
Equity and credit markets largely recovered following an initial decline, which Morningstar DBRS noted may provide support to Q2 results. AUM inflows were a notable positive, particularly among rapidly growing asset manager-backed annuity providers, and capital levels across the sector remained strong even where some insurers recorded net GAAP losses.
The earnings resilience is underpinned by a structural tailwind that shows little sign of fading. Total US annuity sales reached $464.1 billion in 2025, up 7% from 2024, marking the fourth consecutive year of record sales according to LIMRA's US Individual Annuity Sales Survey. In Q1 2026, total US annuity sales reached $104.6 billion, the tenth consecutive quarter above the $100 billion mark.
LIMRA projects 2026 sales will remain above $450 billion, supported by strong demographic demand driven by Peak 65 — the period in which more than four million Americans are turning 65 each year — along with maturing contracts and continued product development. The scale of those inflows, however, raises a question that regulators are increasingly focused on: what is the capital being invested in once it arrives.
Beneath the solid operating performance, regulators and investors are pressing more urgently on the risk embedded in the private credit assets that have come to define life insurer balance sheets.
Life insurer investments in private credit reached $849 billion, or 14% of the sector's balance sheet, in 2024 — more than double the figure recorded a decade earlier — with private equity-owned life insurers identified as the primary driver of that growth, according to research from the Federal Reserve Bank of Chicago.
Private and illiquid bond holdings grew from $685 billion at year-end 2024 to $807 billion at year-end 2025, an increase of $122 billion in a single year, according to Moody's, which identified concentration risk, a widening credit quality gap, rising structural complexity through asset-backed securities and growing payment-in-kind exposure as dynamics warranting close monitoring.
Morningstar DBRS noted that private credit results in Q1 2026 remained benign, with no indication of performance issues despite widespread concerns about software sector exposure. The default trajectory is nonetheless shifting. Proskauer's Private Credit Default Index reported a default rate of 2.73% in Q1 2026, up from 1.84% two quarters earlier, according to Insurance Business America.
The US Treasury convened domestic and international insurance regulators earlier this year for talks on risks in the private credit sector, with NAIC president Scott White flagging transparency in life insurance portfolios as a top regulatory priority for 2026, according to American Banker. Regulators in both the US and Bermuda are tightening disclosure and capital rules to ensure capital levels keep pace with embedded risk, particularly in private credit and offshore reinsurance structures.
One further factor shapes the near-term outlook. Rising interest rates will have a negative short-term mark-to-market impact on life insurer balance sheets but will ultimately prove positive through improved investment yields and profit margins.
S&P Global Ratings expects the sector's fundamentals to remain resilient, with roughly 95% of North American life insurers carrying ratings of A- or higher and 87% assigned stable outlooks, according to InvestmentNews.
The picture that emerges is one of operational strength meeting structural complexity. Record annuity inflows are funding growth, yields are improving and capital remains robust. But the private credit build-up that helped finance much of that expansion is drawing regulatory attention at a pace that is unlikely to slow.
