 |
|
               
    
    
|
|
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 fixed period of time or over the lifetimes of the contract holder and 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/HEALTH INSURER FINANCIAL ASSET DISTRIBUTION, 2003-2007
($ billions)
|
2003 |
2004 |
2005 |
2006 |
2007 |
| Total financial assets | $3,772.8 | $4,130.3 | $4,350.7 | $4,685.3 | $4,950.3 |
| Checkable deposits and currency | 47.3 | 53.3 | 47.7 | 56.1 | 58.3 |
| Money market fund shares | 151.4 | 120.7 | 113.6 | 162.3 | 226.6 |
| Credit market instruments | 2,488.3 | 2,661.4 | 2,765.4 | 2,806.1 | 2,890.8 |
| Open market paper | 55.9 | 48.2 | 40.2 | 53.1 | 57.9 |
| U.S. government securities | 420.7 | 435.6 | 459.7 | 460.6 | 467.7 |
| Treasury | 71.8 | 78.5 | 91.2 | 83.2 | 80.2 |
| Agency- and GSE (1)-backed securities | 348.9 | 357.1 | 368.5 | 377.4 | 387.5 |
| Municipal securities | 26.1 | 30.1 | 32.5 | 36.6 | 35.3 |
| Corporate and foreign bonds | 1,620.2 | 1,768.0 | 1,840.7 | 1,841.9 | 1,889.7 |
| Policy loans | 104.5 | 106.1 | 106.9 | 110.2 | 113.9 |
| Mortgages | 260.9 | 273.3 | 285.5 | 303.8 | 326.2 |
| Corporate equities | 919.3 | 1,053.9 | 1,161.8 | 1,364.8 | 1,491.5 |
| Mutual fund shares | 91.7 | 114.4 | 109.0 | 148.8 | 161.4 |
| Miscellaneous assets | 74.7 | 126.6 | 153.1 | 147.1 | 121.6 |
(1) Government-sponsored enterprise.
Source: Board of Governors of the Federal Reserve System, June 5, 2008. |
| |
|
CAPITAL AND SURPLUS
Capital, in a publicly owned life insurance company, is the shareholders' equity. In a mutual company, capital is retained earnings. Surplus in both cases is what is left when basic liabilities (unearned premiums and reserves for unpaid claims, etc.) are subtracted from assets (earned premiums, investments, reinsurance, etc.).
The life/health insurance industry’s net income fell 5.3 percent to $34.0 billion in 2006 from $35.9 billion in 2005.
| |
|
LIFE/HEALTH INSURANCE INDUSTRY: SELECTED OPERATING DATA, 2004-2006
($ millions)
|
2004 |
2005 |
2006 |
| Net premiums and annuity considerations (1) | $531,160.3 | $528,143.1 | $583,572.6 |
| Net investment income | 145,544.8 | 154,600.0 | 158,116.7 |
| Net gain from operations (2) | 41,146.0 | 41,481.2 | 38,734.3 |
| Federal and foreign income taxes (3) | 10,002.6 | 8,660.0 | 11,298.2 |
| Net realized capital gains/losses | 1,039.8 | 3,115.1 | 6,529.9 |
| Net income | 32,183.3 | 35,936.3 | 33,966.0 |
| Dividends to stockholders | 17,019.8 | 15,939.5 | 16,450.2 |
| Capital and surplus (end of year) | 196,843.0 | 231,115.0 | 222,335.1 |
|
(1) Annuities, life and accident and health policies and contracts.
(2) After dividends to policyholders and before federal income taxes.
(3) Incurred (excluding tax on capital gain).
Source: National Association of Insurance Commissioners (NAIC) Annual Statement Database, via Highline Data, LLC. Copyrighted information. No portion of this work may be copied or redistributed without the express written permission of Highline Data, LLC. |
| |
|
TOP TWENTY U.S. LIFE/HEALTH INSURANCE GROUPS BY REVENUES, 2007 (1)
($ millions)
Rank |
Group |
Revenues |
Assets |
| 1 | MetLife | $53,150 | $558,562 |
| 2 | Prudential Financial | 34,401 | 485,814 |
| 3 | New York Life Insurance | 29,280 | 179,621 |
| 4 | TIAA-CREF | 27,526 | 420,315 |
| 5 | Massachusetts Mutual Life Insurance | 25,268 | 172,911 |
| 6 | Northwestern Mutual | 22,597 | 156,547 |
| 7 | AFLAC | 15,393 | 65,805 |
| 8 | Genworth Financial | 11,443 | 114,315 |
| 9 | Principal Financial | 10,907 | 154,520 |
| 10 | Lincoln National | 10,738 | 191,435 |
| 11 | Unum Group | 10,567 | 52,433 |
| 12 | Guardian Life Ins. Co. of America | 10,071 | 41,319 |
| 13 | Thrivent Financial for Lutherans | 6,133 | 57,412 |
| 14 | Pacific Life | 5,325 | 111,024 |
| 15 | Western & Southern Financial Group | 4,811 | 30,941 |
| 16 | Conseco | 4,572 | 33,515 |
| 17 | Mutual of Omaha Insurance | 4,337 | 17,746 |
| 18 | CUNA Mutual Group | 3,850 | 14,946 |
| 19 | Torchmark | 3,487 | 15,241 |
| 20 | American National Insurance | 3,071 | 18,465 |
| (1) Revenues for insurance companies include premium and annuity income, investment income and capital gains or losses but exclude deposits.
Source: Fortune. |
| |
|
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. By 2006 affiliated (i.e., captive) agents held 35 percent of new individual life insurance sales, independent agents held 56 percent and others, including stockbrokers, accounted for the remaining 9 percent, according to LIMRA.
| |
|
INDIVIDUAL LIFE MARKET SHARE BY CHANNEL, 1983-2006
(Based on first year collected premium)
(1) Includes career, multiline exclusive agents and home service.
(2) Includes brokers and personal producing general agents.
(3) Includes stockbrokers, financial institutions and direct.
(4) Estimate.
Source: LIMRA’s Market Share by Distribution Channel Survey, LIMRA estimates.
| |
|
WORKSITE LIFE INSURANCE COMPANY SALES
BY LINE OF BUSINESS, 2006 (1)
(1) 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.
(2) Short-term and long-term disability.
Source: East Bridge Consultants.
| - Worksite sales of life and health insurance in 2006 were $4.7 billion, up 8
percent from $4.4 billion in 2005.
| |
| |
|
|
|
|
|
