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November 11, 2001 at 07:00 PM
New Ordinary Life Premiums Set Records In 2000
By Frederick S. Townsend
Ordinary life sales reached an all-time high in 2000, with new annual premiums rising 11% over 1999, for the 135 largest U.S. ordinary life insurers (each writing more than $100 million of direct premiums in 2000).
Average new premium, per policy issued, rose 15% and set an industry high of $1,840 per policy issued.
Total new and renewal ordinary life premiums, excluding single premiums, increased 7% in 2000. Annual premium growth was impeded by higher termination ratios in 1999 and 2000 (after 14 consecutive years of improvement).
Strong growth in annual premiums enabled the ratio of general expenses to annual premiums to improve from 18.3% in 1999 to 17.6% in 2000, the lowest industry ratio since 17.5% in 1996.
Statutory profit margins in 2000 were depressed by the higher termination ratio and the cost of more new business.
Pretax operating earnings, as a percent of total income, fell to 5.2% in 2000, its lowest ratio since 5% in 1998 and 4.8% in 1989.
After-tax operating earnings, as a percent of total income, fell to 3.8% in 2000. Taxes were 27% of pretax statutory earnings.
The Industry Table (see page 58) shows 1996-2000 data for a composite of 135 U.S. life insurers comprising 91% of the industry’s total ordinary life premiums.
Table 1 shows the 10 leading companies in new annual premiums. Hartford Life ranked first in 1997, 1998 and 2000, on the strength of corporate-owned life insurance sales.
Nationwide Life and Northwestern Mutual, ranked 2nd and 3rd by posting sales increases of 30% and 15%, respectively.
Only Hartford Life (1st), Southland (8th) and Hartford Life & Annuity (10th) were new to the Top 10 list in 2000. Tenth position was a record $398 million of new premiums in 2000, compared to $245 million in 1997.
Table 2 shows the 10 companies with the highest ratio of new annual premiums to total annual premiums. Six companies are new to this list, and the top 8 companies had new premiums exceeding their renewal premiums.
Hartford Life benefits from large COLI production, Nationwide L&A only allocates 8% of general expenses to ordinary life, and Valley Forge has a low intercompany expense allocation.
Table 5 shows the 10 companies with the highest average premium per policy issued, exceeding 10 times the industry average, which generates operating efficiencies.
