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3Q Individual Life Sales Edged Up While Fixed Annuity Sales Fell

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Individual life insurance sales edged up slightly in the 3rd quarter of 2003, according to a summary report of quarterly sales from LIMRA International, Windsor, Conn.

Meanwhile, fixed annuity sales in the 3rd quarter fell by 29% from the same period in 2002.

Those are among preliminary results of LIMRA surveys in these 2 areas.

In the life insurance area, annualized new individual premiums increased 2% over the same quarter in 2002, says LIMRA.

Fixed products accounted for much of this increase, the life sales report says. For example, universal life premiums were up 36% for the quarter and 28% year-to-date. Research that LIMRA is conducting now suggests that UL policies with secondary guarantees are driving much of this increase.

In addition, annualized premium for whole life products rose by 8% for the quarter over the year-earlier period and 9% year-to-date.

Meanwhile, sales in variable universal life were off 32% for the quarter and 36% year-to-date.

Another form of the variable product line–variable lifesaw sales fall even more. VL sales dropped 41% for the quarter and by 47% year-to-date. For all 3 quarters of 2003, total individual life annualized premium fell by 2% over the same period in 2002, LIMRA says.

The research organization points out that total variable life results are tracking closely with the S&P 500 index, while the universal life and whole life products have shown the opposite trend (See Chart 1).

What about term life insurance? Those sales remained flat on both a quarterly and year-to-date basis, says LIMRA. But half of the top reporting term insurers did show increases, while the other half reported decreases, LIMRA says.

At some insurers, the report adds, the relatively new return-of-premium term products may have started impacting sales.

In the annuity sector, total annuity sales were off 8% in the 3rd quarter of 2003 compared to the same year-earlier period, the LIMRA estimates say. But they were off only 2% when compared on a year-to-date basis (See Chart II).

Fixed annuity sales accounted for the downdraft. Their total considerations fell 17% this year compared to last and 29% in the 3rd quarter compared to the same period last year, says LIMRA.

By comparison, total variable annuity sales rose by 12% on a quarter-to-quarter basis this year to last, and also by 12% when compared on a year-to-date basis, this year and last.

The fixed annuity sales totalestimated at $20.3 billionrepresents a decline from the all-time record for fixed annuities in the 3rd quarter of 2002, LIMRA points out.

The fixed deferred annuity products dropped by 32% in the 3rd quarter 2003, compared to the 3rd quarter last year, according to the figures. (Here is the break-down: Book value sales, at $12.5 billion, dropped 23% quarter to quarter; equity index annuity sales, at $2.9 billion, dropped 15%; and market value adjusted annuities, at $2.2 billion, dropped 65%.)

Meanwhile, fixed immediate annuities saw a 6% increase in year-to-date sales, 2003 to 2002. But in the 3rd quarter, these sales fell by 15% compared to the year-earlier period.

A significant development in the VA market is that premiums deposited directly into VA separate accounts increased for the 3rd consecutive quarter, says LIMRA. This percentage had bottomed out at 54% in the 3rd quarter of 2002 but in the 3rd quarter of 2003, it reached 65%.

This is the first time in 5 quarters that separate account premiums made up over 60% of VA premium, says the report.

LIMRA researchers Elaine Tumicki, Bette F. Mayo, Marianne Purushotham and Ashley Durham prepared the life sales report. LIMRA researcher Dan Beatrice prepared the annuity sales report.

Reproduced from National Underwriter Life & Health/Financial Services Edition, January 2, 2004. Copyright 2004 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.