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Life Health > Life Insurance

1Q Variable Life Sales At $626 Million Were Off 44% From 1Q 2002

By Geraldine Murtagh

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Variable life experienced a downturn in sales during the first quarter of 2003 compared to the fourth quarter of 2002. This is consistent with the seasonal trend that life insurance sales typically exhibit. However, sales for the 2003 first quarter were significantly lower than first quarter 2002 sales.

VL sales with single premiums included at 10% for the 51 companies reporting in Tillinghasts VALUE survey for the first quarter of 2003 were $626 million. This is a 24% decrease from fourth quarter 2002, which had sales of $824 million, and a 44% decrease from first quarter 2002, which had sales of $1.119 billion.

(Sales include first-year annualized premium, drop-in premiums and 10% of single premiums.)

The market estimate for the first quarter of 2003 with single premiums included at 10% is $675 million.

Variable life sales with single premiums included at 100% for the 51 companies in the VALUE survey for the fourth quarter of 2002 were $650 million. This is almost a 25% decrease from the fourth quarter of 2002, which had sales of $861 million, and a 44% decrease from first quarter 2002 sales, which were $1.163 billion.

The market estimate for first quarter 2003 with single premiums included at 100% is $700 million.

For 2002, the top five companies/fleets–Pacific Life, Hartford Life, Nationwide, Equitable and IDS–captured 36% of all variable life sales (including single premiums at 10%), while the top 10 companies/fleets garnered 59% of all sales. For the first quarter of 2003, IDS ranked among the top five companies, displacing MetLife.

For the companies reporting in the survey, the number of flexible premium contracts issued during first quarter 2003 decreased 39% from the number issued during first quarter 2002. The average face amount decreased 1% to $299,596, while the percentage of premium allocated to the general account increased to 9%.

The total premium for the 10 companies participating in VALUE with 10 single-premium products for first quarter 2003 was $17.3 million, compared to $32.6 million for first quarter 2002.

The number of single-premium contracts issued during first quarter 2003 was 42% lower than the number issued during first quarter 2002. The average face amount increased 3% to $143,972, while the average premium decreased 8% to $65,038.

The total premium from all second-to-die products issued during first quarter 2003 for those companies in the survey was $85.4 million, compared to $179.2 million during first quarter 2002. This decrease in premium can be attributed in part to the proposed changes and uncertainty surrounding estate taxes.

The number of second-to-die contracts (including single-premium and flexible-premium products) issued during first quarter 2003 decreased 48% from first quarter 2002. The average face amount decreased 15% to $2,074,825.

For the companies reporting sales by distribution channel for first quarter 2003, independent broker-dealer firms and career agents dominated flexible-premium variable life sales, capturing 45% and 41% of the market, respectively.

Career agents and independent broker-dealer firms dominated single-premium variable life sales in first quarter 2003, capturing 41% and 40% of the market, respectively. Regional firms captured 13% of the market.

As of March 31, 2003, total variable life assets for the companies reporting in VALUE were $75.7 billion, down from $86 billion on March 31, 2002. Of the total assets reported, 87% were held in a separate account, down from 91% at March 31, 2002.

VALUE classes funds into the following categories: growth, aggressive growth, growth and income, international stock, government bond, corporate bond, high-yield bond, international bond, money market, balanced and specialty (e.g., gold, real estate).

As of March 31, 2003, approximately 69% of the variable life separate account assets were in stock funds; 12%, bond funds; 9%, money market funds; 8%, balanced funds; and 2%, specialty funds.

Fixed account interest rates on VL policies have decreased. The average one-year interest rate on March 31, 2003, was 4.97%, down from 5.34%n Dec. 31, 2002. The average renewal rate on March 31, 2003, decreased to 5.03% from 5.11% on Dec. 31, 2002.

, CLU, ChFC, is with Tillinghast-Towers Perrin.

Reproduced from National Underwriter Edition, June 16, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.

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