When asked about S&P’s economic outlook for the U.S. economy, Carmi Margalit replied, “It ain’t great.”
Margalit is S&P Global Ratings’ managing director and life insurance lead. He was one of the presenters on a recent S&P Global Market Intelligence webinar on the insurance industry outlook for the second half of the year.
“We are definitely seeing a slowdown in the growth in the U.S. economy,” Margalit said. S&P predicts U.S. economic expansion will slow sharply in 2025 and remain below the long-term average.
Uncertainty and tariffs are the two main forces driving that prediction.
“A lot of that uncertainty stems from the fact that A). Nobody really knows what the tariff policy will be. B). it’s hard to know what the impact of that tariff policy will be on various sectors,” Margalit said.
Despite that pessimistic economic outlook, S&P’s outlook for the life insurance sector is stable. The fundamentals for life insurers – including interest rates, corporate bond defaults, and demographic trends – are largely trending positive, although some risks persist.
Margalit said the potential slowing of the U.S. economy and the risk of recession might hamper the life sector’s profitability and growth. However, sales, especially annuity sales, grew rapidly over the past two years, and profitability is solid.
Looking at life insurance in the fourth quarter of 2024, S&P saw earnings surge year over year and improved investment income.