By Geraldine Murtagh

Although variable life experienced a 23% upturn in sales in 4th quarter 2003 compared to the 3rd quarter, consistent with the seasonality trend that life insurance sales typically exhibit, full-year 2003 sales were down 36% compared to 2002.

VL sales with single premiums included at 10% for the 48 companies reporting in Tillinghasts VALUE survey for 4th quarter 2003 were $697 million, with full-year sales of $2.46 billion.

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

Fourth quarter 2003 sales were almost 14% lower than in 4th quarter 2002. The market estimate for 2003 with single premiums included at 10% is $2.575 billion.

VL sales with single premiums included at 100% for the 48 companies in the VALUE survey for 4th quarter 2003 were $715 million with full-year sales at $2.5 billion. This is a 15% decrease from 4th quarter 2002, which had sales of $842 million, and almost a 22% increase over 3rd quarter 2003 sales, which were $587 million.

The market estimate for 2003 with single premiums included at 100% is $2.6 billion.

For 2002, the top 5 companies/fleets–Hartford Life, Pacific Life, IDS, Nationwide and Equitable–captured 37% of all VL sales (including single premiums at 10%), while the top 10 companies/fleets garnered 61% of VL sales. For 2003, IDS ranked among the top 5, displacing MetLife, which ranked among the top 5 for 2002.

For the companies in the survey, the number of flexible-premium contracts issued during 2003 decreased 29% from the number issued during 2002. The average face amount increased 4% to $309,383, while the percentage of premium allocated to the general account remained at 7%.

The total premium for single-premium products for the 9 companies in VALUE for 2003 was $58 million, compared to $129 million for 2002.

The number of single-premium contracts issued during 2003 was 51% lower than the number issued during 2002. The average face amount decreased 9% to $134,510, while the average premium decreased 8% to $59,917.

The total premium from all second-to-die products issued during 2003 for the companies in the survey was $289 million, compared to $580 million during 2002.

The number of second-to-die contracts (including single-premium and flexible-premium products) issued during 2003 slid 44% from 2002. The average face amount fell 15% to $2,057,449.

For the companies reporting sales by distribution channel for 2003, career agents and independent broker-dealer firms dominated flexible-premium variable life sales, capturing 45% and 43% of the market, respectively.

Career agents and independent broker-dealer firms dominated single-premium variable life sales in 2003, capturing 49% and 29% of the market, respectively. Regional firms captured 17% of the market and warehouses had 4%.

As of Dec. 31, 2003, total variable life assets for the companies reporting in VALUE were $95.8 billion, up 28% from $75.1 billion on Dec. 31, 2002. Of the total assets reported, 91% were held in a separate account.

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 Dec. 31, 2003, approximately 75% of the variable life separate account assets were in stock funds; 10%, bond funds; 6%, money market funds; 8%, balanced funds; and 2%, specialty funds.

Fixed account interest rates on VL policies increased slightly. The average one-year interest rate on Dec. 31, 2003, was 4.63%, down from 4.71% on Sept. 30, 2003. The average renewal rate on Dec. 31, 2003, decreased to 4.61% from 4.77% on Sept. 30, 2003.

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


Reproduced from National Underwriter Life & Health/Financial Services Edition, March 19, 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.