Analysts Trends in LDTI

Since 2019, KPMG has surveyed analysts from insurance industry research firms, rating agencies, and investment banks to understand their information needs for performance comparisons between companies, as well as gain insights on the impact of the new guidance. In the 2023 report, participants expressed their views about LDTI’s effects on insurers' financial statements and raised concerns about potential earnings volatility.

Key findings:

• Capital position remains the top key metric analyst use for evaluating insurers' financial performance.
• Most respondents considered the LDTI required enhanced disclosures to be the “most helpful” change, but concerns about comparability between insurers and increased cost of capital remain.
• To mitigate the added challenge of earnings volatility resulting from the unlocking of assumptions and fair value measurement, there is a greater need for supplementary reporting of additional performance measures.
• Analysts have demonstrated progress in their LDTI familiarity, with 88 percent stating they were “familiar” or “very familiar”.

While LDTI brings challenges in terms of adoption, implementation, and compliance costs, it also provides an opportunity for insurers to refine their financial reporting and improve decision-making. Insurers need to review and update valuation assumptions regularly, which can lead to greater accuracy in financial reporting and an improved understanding of business performance.