Financial Results

LIFE/HEALTH SECTOR

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.

2014 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 declined compared with 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.

INVESTMENTS

The life/health insurance industry’s cash and invested assets totaled $3.6 trillion in 2014, 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.

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