Life Insurance

THE LIFE/HEALTH INSURANCE INDUSTRY

Whether measured by premium income or by assets, traditional life insurance is no longer the primary business of many companies in the life/health insurance industry. Today, the emphasis has shifted to the underwriting of annuities. Annuities are contracts that accumulate funds and/or pay out a fixed or variable income stream. An income stream can be for a set period of time or over the lifetimes of the contract holder or his or her beneficiaries.

Nevertheless, traditional life insurance products such as universal life and term life for individuals as well as group life remain an important part of the business, as do disability income and health insurance.

Life insurers invest primarily in corporate bonds but also significantly in corporate equities. Besides annuities and life insurance products, life insurers may offer other types of financial services such as asset management.

LIFE INSURANCE OWNERSHIP

Fifty-seven percent of all people in the United States were covered by some type of life insurance in 2014, according to LIMRA’s 2015 Insurance Barometer Study. Nearly one-third  of Americans said they need more life insurance in 2015, as reported in the LIMRA study. Other findings from the 2015 report include:

  • Fifty-four percent of Americans say they are unlikely  to purchase a life insurance policy within the next year. Sixty-five percent said that they have not purchased more life insurance because they think it is too expensive, yet 80 percent of consumers misjudge the price of term life insurance.
  • Millennials overestimate the cost by 213 percent and Gen Xers overestimate the cost by 119 percent.
  • The most common financial worry among consumers over 25 years old is being able to afford a comfortable retirement. Consumers 25 and under are more concerned with paying monthly bills.
  • Only 13 percent of Americans own long-term care insurance; 26 percent own disability insurance.

 

INVESTMENTS, LIFE/HEALTH INSURERS, 2012-2014 (1)

($ billions, end of year)

  Amount Percent of total investments
Investment type 2012 2013 2014 2012 2013 2014
Bonds $2,543.5 $2,601.5 $2,685.2 74.65% 74.61% 73.85%
Stocks 79.3 82.0 87.8 2.33 2.35 2.42
     Preferred stock 7.8 8.3 9.1 0.23 0.24 0.25
     Common stock 71.5 73.8 78.7 2.10 2.12 2.16
Mortgage loans on real estate 335.6 353.2 373.0 9.85 10.13 10.26
     First lien real estate mortgage loans 333.1 350.1 368.4 9.78 10.04 10.13
     Real estate loans, less first liens 2.5 3.1 4.6 0.07 0.09 0.13
Real estate 20.9 21.4 21.5 0.61 0.61 0.59
     Occupied properties 5.5 5.4 5.5 0.16 0.16 0.15
     Income generating properties 15.4 16.0 16.0 0.45 0.46 0.44
     Properties for sale 0.5 1.0 0.4 0.02 0.03 0.01
Cash, cash equivalent and short term investments 106.6 94.8 100.0 3.13 2.72 2.75
Contract loans including premium notes 127.6 128.5 130.2 3.74 3.69 3.58
Derivatives 41.6 37.8 56.5 1.22 1.08 1.55
Other invested assets 138.6 147.7 164.2 4.07 4.23 4.51
Receivables for securities 2.1 3.2 2.2 0.06 0.09 0.06
Securities lending reinvested collateral assets 10.8 13.8 11.2 0.32 0.40 0.31
Write-ins for invested assets -0.3 1.7 4.0 -0.01 0.05 0.11
Total cash and invested assets $3,407.0 $3,486.6 $3,636.2 100.00% 100.00% 100.00%

(1) Data are net admitted assets of life/health insurers.

Source: SNL Financial LC.

View Archived Tables

 

LIFE/HEALTH INSURANCE: FINANCIAL RESULTS

In 2014 the life insurance industry posted mixed results as it continued to face challenges from little household income growth, changing demographics, low interest rates, and consumers’ having other financial priorities. Although premiums rose to the highest level since the Great Recession, operating results retreated vs. 2013 partly because of significantly increased surrenders. The industry’s net gain from operations before federal income taxes dropped to $49.0 billion in 2014 from $63.8 billion in 2013. Capital and surplus rose to $354.1 billion in 2014 from $331.8 billion in 2013, according to SNL Financial.

 

LIFE/HEALTH INSURANCE INDUSTRY INCOME STATEMENT, 2010-2014

($ billions, end of year)

  2010 2011 2012 2013 2014 Percent change,
2013-2014 (1)
Revenue            
Life insurance premiums $100.3 $122.8 $130.5 $126.1 $133.8 6.2%
Annuity premiums and deposits 286.3 327.0 339.9 279.4 352.8 26.3
Accident and health premiums 150.8 151.1 151.4 153.3 156.6 2.2
Credit life and credit accident and health premiums 1.6 1.6 1.6 1.4 1.4 -3.9
Other premiums and considerations 23.1 2.1 2.2 2.3 2.6 8.9
Total premiums, consideration and deposits $562.1 $604.5 $625.7 $562.6 $647.3 15.1%
Net investment income 164.1 167.3 166.5 168.0 171.7 2.3
Reinsurance allowance -29.3 -16.3 -30.8 -21.2 -15.0 -29.5
Separate accounts revenue 23.4 26.1 29.5 31.4 34.3 9.1
Other income 53.0 53.3 41.5 43.0 39.5 -8.0
Total revenue $773.3 $835.0 $832.5 $783.7 $877.9 12.0%
Expense            
Benefits 231.6 239.0 241.8 250.8 251.8 0.4
Surrenders 216.8 237.3 245.7 248.7 281.5 13.2
Increase in reserves 96.2 141.2 83.8 86.2 108.7 26.1
Transfers to separate accounts 29.3 32.4 61.6 -0.8 -16.5 (2)
Commissions 48.9 51.4 52.6 53.0 52.1 -1.8
General and administrative expenses 54.7 56.4 57.2 58.5 59.0 0.8
Insurance taxes, licenses and fees 7.5 7.8 8.0 8.2 10.0 21.7
Other expenses 2.2 8.1 6.7 -0.4 65.8 (2)
Total expenses $687.2 $773.6 $757.4 $704.3 $812.4 15.4%
Net income            
Policyholder dividends 15.0 15.1 15.2 15.7 16.4 4.9
Net gain from operations before federal income tax 53.1 28.0 59.6 63.8 49.0 -23.1
Federal income tax 8.6 4.7 9.9 8.6 10.1 18.2
Net income before capital gains $44.1 $22.9 $49.7 $55.2 $38.9 -29.5%
Net realized capital gains (losses) -16.0 -8.5 -9.4 -12.0 -1.3 -89.1
Net income $28.0 $14.4 $40.3 $43.2 $37.6 -12.9%
Pre-tax operating income 53.1 28.0 59.6 63.8 49.0 -23.1

(1) Calculated from unrounded data.
(2) Not applicable.

Source: SNL Financial LC.

View Archived Tables

 

 

LIFE/HEALTH INSURER FINANCIAL ASSET DISTRIBUTION, 2007-2011

($ billions)

  2007 2008 2009 2010 2011
Total financial assets $4,949.7 $4,515.5 $4,823.9 $5,176.3 $5,340.2
Checkable deposits and currency 58.3 82.8 50.7 51.7 54.8
Money market fund shares 21.6 39.2 33.7 21.0 25.8
Security repurchase agreements (1) 2.7 8.0 10.2 10.9 10.7
Credit market instruments 2,871.2 2,882.8 3,022.6 3,174.2 3,323.9
     Open market paper 41.7 38.3 49.8 40.9 40.9
     U.S. government securities 453.5 471.9 505.4 532.6 549.8
          Treasury 70.6 105.7 133.5 156.6 162.7
          Agency- and GSE (2)-backed securities 382.9 366.2 371.9 376.0 387.1
     Municipal securities 41.4 47.1 73.1 112.3 122.6
     Corporate and foreign bonds 1,862.6 1,817.0 1,927.2 2,030.2 2,128.7
     Other loans and advances 145.8 166.1 140.9 140.7 148.7
     Mortgages 326.2 342.4 326.1 317.5 333.2
Corporate equities 1,464.6 1,001.7 1,208.5 1,402.6 1,443.0
Mutual fund shares 188.4 121.0 140.8 155.7 150.1
Miscellaneous assets 342.9 380.1 357.6 360.3 331.9

(1) Short-term agreements to sell and repurchase government securities by a specified date at a set price.
(2) Government-sponsored enterprise.

Source: Board of Governors of the Federal Reserve System, June 7, 2012.

View Archived Tables

 

PREMIUMS BY LINE

Measured by premiums written, annuities are the largest life/health product line, followed by health insurance (also referred to in the industry as accident and health) and life insurance. Life insurance policies can be sold on an individual, or "ordinary," basis or to groups such as employees and associations. Accident and health insurance includes medical expense, disability income and long-term care. Other lines include credit life, which pays the balance of a loan if the borrower dies or becomes disabled, and industrial life, small policies whose premiums are generally collected by an agent on a weekly basis.

 

DIRECT PREMIUMS WRITTEN BY LINE, LIFE/HEALTH INSURANCE INDUSTRY, 2012-2014

($000)

  2012 2013 2014
Lines of insurance Direct
premiums
written (1)
Percent
of total
Direct
premiums
written (1)
Percent
of total
Direct
premiums
written (1)
Percent
of total
Annuities            
Ordinary individual annuities $192,291,621 28.1% $198,862,072 30.7% $205,448,744 31.0%
Group annuities 164,069,697 24.0 120,091,136 18.6 119,716,314 18.1
Total $356,361,318 52.0% $318,953,208 49.3% $325,165,057 49.1%
Life            
Ordinary life 132,639,900 19.4 129,963,536 20.1 132,935,453 20.1
Group life 34,419,733 5.0 33,532,415 5.2 34,378,152 5.2
Credit life (group and individual) 1,129,433 0.2 990,170 0.2 960,229 0.1
Industrial life 165,688 (2) 146,248 (2) 142,962 (2)
Total $168,354,754 24.6% $164,632,370 25.5% $168,416,797 25.4%
Accident and health (3)            
Group 90,460,090 13.2 94,590,278 14.6 98,108,859 14.8
Other 68,764,256 10.0 67,673,915 10.5 69,655,745 10.5
Credit 954,569 0.1 966,052 0.1 954,502 0.1
Total $160,178,916 23.4% $163,230,245 25.2% $168,719,106 25.5%
All other lines 46 (2) 3,027 (2) 3,482 (2)
Total, all lines (4) $684,895,034 100.0% $646,818,849 100.0% $662,304,443 100.0%

(1) Before reinsurance transactions.
(2) Less than 0.1 percent.
(3) Excludes accident and health premiums reported on the property/casualty and health annual statements.
(4) Excludes deposit-type funds.

Source: SNL Financial LC.

View Archived Tables

 

CREDIT LIFE INSURANCE

Credit life insurance, a form of decreasing term insurance, protects creditors such as banks. The borrower pays the premium, generally as part of the credit transaction, to cover the outstanding loan in the event he or she dies. The face value of a policy decreases as the loan is paid off until both equal zero. When loans are paid off early, premiums for the remaining term are returned to the policyholder. Credit accident and health, a similar product, provides a monthly income in the event the borrower becomes disabled.

 

CREDIT LIFE, AND CREDIT ACCIDENT AND HEALTH INSURANCE DIRECT PREMIUMS WRITTEN, 2005-2014

($000)

Year Credit life Credit accident and health
2005 $1,607,487 $1,522,791
2006 1,564,124 1,442,604
2007 1,631,338 1,407,579
2008 1,563,206 1,251,052
2009 1,248,710 964,781
2010 1,247,848 930,578
2011 1,226,326 930,318
2012 1,159,524 957,294
2013 977,557 968,691
2014 961,247 955,261

Source: SNL Financial LC.

View Archived Tables

 

 

TOP 10 WRITERS OF LIFE INSURANCE/ANNUITIES BY DIRECT PREMIUMS WRITTEN, 2014

($000)

Rank Group/company Direct premiums written (1) Market share (2)
1 MetLife Inc. $95,331,132 16.1%
2 Prudential Financial Inc. 44,720,129 7.6
3 New York Life Insurance Group 28,393,849 4.8
4 Jackson National Life Group 26,708,218 4.5
5 AEGON 25,339,180 4.3
6 Lincoln National Corp. 24,329,107 4.1
7 American International Group 23,279,901 3.9
8 Principal Financial Group Inc. 18,894,839 3.2
9 Manulife Financial Corp. 18,513,758 3.1
10 Massachusetts Mutual Life Insurance Co. 16,818,431 2.8

(1) Before reinsurance transactions. Includes life insurance, annuity considerations, deposit-type contract funds and other considerations; excludes accident and health insurance.
(2) Based on U.S. total, includes territories.

Source: SNL Financial LC.

View Archived Tables

 

DISTRIBUTION CHANNELS

Life insurance was once sold primarily by career life agents, captive agents that represent a single insurance company, and by independent agents, who represent several insurers. Now, life insurance is also sold directly to the public by mail, telephone and through the Internet. In addition, in the 1980s insurers began to market annuities and term life insurance through banks and financial advisors, professional groups and the workplace. A large portion of variable annuities, and a small portion of fixed annuities, are sold by stockbrokers. In 2014 independent agents held 50 percent of the new individual life insurance sales market, followed by affiliated (i.e., captive) agents with 40 percent, direct marketers with 5 percent and others accounting for the remaining 5 percent, according to LIMRA, a life insurance trade association.

 

LIFE INDIVIDUAL MARKET SHARE BY DISTRIBUTION CHANNEL, 2005-2014

(Based on first-year collected premiums)

(1) Includes brokers, stockbrokers and personal producing general agents.
(2) Includes career, multiline exclusive and home service agents.
(3) No producers are involved. Excludes direct marketing efforts involving agents.
(4) Includes financial institutions, worksite and other channels.

Source: LIMRA’s U.S. Individual Life Insurance Sales Survey and LIMRA estimates.

View Archived Graphs

ONLINE SALES

Eighty-five percent of consumers say they would use the Internet to research life insurance before purchasing coverage, according to the 2015 Insurance Barometer Study by the Life and Health Insurance Foundation for Education (LIFE) and LIMRA, about the same number as a year ago. About 90 percent of consumers between the ages of 25 and 44 would use the Internet to research life insurance. That amount falls for older age groups and was at 76 percent for consumers age 65 and older. About a quarter of consumers went online to find an agent or financial adviser and about one in three went online to find information about an agent or adviser. When it comes to purchasing life insurance, face-to-face with a financial adviser or agent was the most favored life insurance sales channel, with 52 percent preferring that method. Online was a strong second for all age groups, favored by 22 percent of respondents. About one in three respondents under the age of 45 said they preferred the online route, up from one in four a year ago. Other preferred channels were workplace sales (10 percent), mail (8 percent), phone (4 percent) and email (4 percent). About 40 percent of online shoppers went to a website with a quote engine. However, LIMRA research shows that most of these shoppers do so to obtain quick and easy price quotes—only 14 percent of online purchasers bought life insurance from a website that gives quotes, while more than half bought coverage from a company website.

 

WORKSITE LIFE INSURANCE SALES BY LINE OF BUSINESS, 2014

(1) Short-term and long-term disability.

Source: Eastbridge Consulting Group, Inc.

View Archived Graphs

  • Worksite marketing is the selling of voluntary (employee-paid) insurance and financial products at the worksite. The products may be on either an individual or group platform and are usually paid through periodic payroll deductions.
  • Worksite sales of life and health insurance totaled $6.89 billion in 2014, up about 3.7 percent from 2013.

 

TOP 10 WRITERS OF INDIVIDUAL LIFE INSURANCE BY DIRECT PREMIUMS WRITTEN, 2014

($000)

Rank Group/company Direct premiums written (1) Market share
1 Northwestern Mutual Life Insurance Co. $9,551,489 8.1%
2 MetLife Inc. 6,863,942 5.8
3 New York Life Insurance Group 6,501,407 5.5
4 Lincoln National Corp. 5,630,181 4.8
5 Manulife Financial Corp. 4,717,567 4.0
6 Prudential Financial Inc. 4,426,981 3.7
7 Massachusetts Mutual Life Insurance Co. 4,362,771 3.7
8 AEGON 4,104,809 3.5
9 State Farm Mutual Automobile Insurance 4,059,521 3.4
10 Aflac Inc. 3,955,899 3.3

(1) Before reinsurance transactions. Based on U.S. total, includes territories. Excludes annuities, accident and health, deposit-type contract funds and other considerations.

Source: SNL Financial LC.

View Archived Tables

 

 

TOP 10 WRITERS OF GROUP LIFE INSURANCE BY DIRECT PREMIUMS WRITTEN, 2014

($000)

Rank Group/company Direct premiums written (1) Market share
1 MetLife Inc. $5,360,171 17.8%
2 Prudential Financial Inc.  3,333,622 11.1
3 Securian Financial Group 2,101,502 7.0
4 New York Life Insurance Group 1,770,567 5.9
5 Cigna Corp. 1,719,727 5.7
6 Unum Group 1,280,542 4.3
7 Hartford Financial Services 1,257,665 4.2
8 Massachusetts Mutual Life Insurance Co. 1,242,279 4.1
9 Aetna Inc. 1,079,745 3.6
10 Lincoln National Corp. 807,532 2.7

(1) Before reinsurance transactions. Based on U.S. total, includes territories. Excludes annuities, accident and health, deposit-type contract funds and other considerations.

Source: SNL Financial LC.

View Archived Tables