Life premiums stay flat in Q3'12
By Wayne Dalton
Life insurance premium declines at MetLife Inc., Lincoln National Corp., New York Life Insurance Co. and Prudential Financial Inc. offset gains made by other top 10 U.S. life insurers in the third quarter, based on an analysis performed by SNL of total direct premiums written, which include first-year, single and renewal premiums.
Lincoln saw a 15.0% decline in life premiums in the three months ended Sept. 30 versus the year-earlier period. During Lincoln's Nov. 2 earnings call, President and CEO Dennis Glass said premiums declined due to the company's ongoing efforts to "aggressively re-price guaranteed universal life" business. Glass indicated that Lincoln is beginning to see competitors re-price their guaranteed universal life, "somewhat improving" the opportunity for growth going forward.
MetLife experienced a nearly 10% decrease in life premiums. While the company did not break out life insurance results in its third-quarter earnings release or discuss them on its earnings call, it did report a 30.8% drop in universal life sales for the three months ended Sept. 30 compared to the 2011 period in its financial supplement.
New York Life reported an increase in sales of recurring premium whole life insurance in a Nov. 19 press release, but total life premium for the company declined 6.5%, according to SNL.
Total direct premiums reflect premiums collected on new business as well as in-force business. Adjustments to the rankings in market share were made to account for significant non-U.S. business at subsidiaries of MetLife and Aflac Inc. (For more details, see the methodology section below.)
Life insurance premiums, consisting of ordinary and group life, are concentrated among a small number of companies, with 49.5% of premiums written by the 10 largest top-tier insurance entities. SNL groups MetLife, Northwestern Mutual Life Insurance Co., Prudential and New York Life account for almost one-third — 30.5% — of all life premiums.
Manulife Financial Corp., Massachusetts Mutual Life Insurance Co. and AXA all reported life premium increases of more than $100 million for the three months ended Sept. 30 versus the year-ago period. In a Nov. 15 press release, MassMutual cited increases in sales of whole life, universal life and bank-owned life insurance as among the drivers for premium growth. Manulife in its Nov. 8 earnings release cited two newly launched products, Protection UL and Indexed UL, as sales drivers at its John Hancock Life Insurance Co. (USA) unit.
Click here for an interactive template that displays direct premiums by line of business.
Methodology behind the rankings
The ranking includes both SNL groups and companies independent of a group. To address the impact of foreign currency conversions for entities with a significant amount of business written outside the U.S., SNL adjusted the rankings to exclude such entities. As a result, American Life Insurance Co. (DE) and American Family Life Assurance Co. of Columbus were excluded, affecting the ranking of SNL groups MetLife and Aflac.
Ordinary life insurance refers to term insurance and all forms of permanent insurance (e.g., universal, variable, variable universal, whole) sold to individuals. Often offered through the workplace, group life insurance is typically term insurance and allows members of a group to purchase coverage up to a certain level without the need for underwriting.
SNL uses statutory total direct premiums to determine market share. Total premium is a preferred indicator of market share as it not only reflects new business but also the persistency of a company's existing business in the form of renewal premiums. Additionally, many policyholder acquisition costs are not recovered within one year. As such, total premium can also be a better indicator of profitability for life insurers, whereas new sales do not necessarily equate with profitability.
LIMRA is often cited by insurers when computing market share, but LIMRA only reports on new sales. LIMRA's standard definition of new sales is annualized new premium, which is based on 100% of new recurring premiums and 10% of single premiums.
Rankings exclude certain New Jersey-domiciled life subsidiaries that, due to local regulations, do not file quarterly statements with the NAIC. The impact to the rankings and industry totals are immaterial.