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Life Health > Life Insurance

1Q 2004 Variable Life Sales Off Slightly

By Geraldine Murtagh

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Variable life experienced a moderate downturn in sales in the 1st quarter of 2004 compared to the 4th quarter, which is consistent with the seasonality trend that life insurance sales typically exhibit. However, sales for the 1st quarter of 2004 were higher than 1st quarter 2003 sales, perhaps indicating a stabilization of the variable life market.

VL sales with single premiums included at 10% for the 46 companies reporting in Tillinghast’s VALUE survey for 1st quarter 2004 were $669 million. This is a 4% decrease from 4th quarter 2003 sales, which were $696 million, but a 7% increase over 1st quarter 2003 sales, which totaled $626 million.

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

The market estimate for the first quarter of 2004 with single premiums included at 10% is $700 million.

VL sales with single premiums included at 100% for the 46 companies in the VALUE survey for 4th quarter 2003 were $687 million. This is a 6% increase over 1st quarter 2003 sales, which were $646 million, and almost a 4% decrease over 4th quarter 2003 sales, which amounted to $714 million.

The market estimate for the 1st quarter of 2004 with single premiums included at 100% is $725 million.

For the 1st quarter of 2004, the top 5 companies/fleetsIDS, Pacific Life, Hartford Life, ING Life and Nationwidecaptured 39% of all VL sales (including single premiums at 10%), while the top 10 companies/fleets garnered 61% of VL sales. For the 1st quarter of 2004, ING Life ranked among the top 5, displacing Equitable, which now ranks 6th.

For the companies in the survey, the number of flexible-premium contracts issued during the 1st quarter of 2004 increased 10% over the number issued during the 1st quarter of 2003. The average face amount increased 10% to $330,651, while the percentage of premium allocated to the general account decreased to 7%.

The single-premium variable life market continues to suffer. Several companies have withdrawn their product from the market. The total premium for single-premium products for the 7 companies in VALUE for the 1st quarter of 2004 was $12 million, compared to $17 million for the 1st quarter of 2003.

The number of single-premium contracts issued during the 1st quarter of 2004 was 26% lower than the number issued during the 1st quarter of 2003. The average face amount increased 1% to $144,953, while the average premium decreased 4% to $62,755.

The total premium from all second-to-die products issued during the 1st quarter of 2004 for the companies in the survey was $82 million, compared to $85 million during the 1st quarter of 2003.

The number of second-to-die contracts (including single-premium and flexible-premium products) issued during the 1st quarter of 2004 fell 5% from the 1st quarter of 2003. The average face amount increased 5% to $2,182,269.

For the companies reporting sales by distribution channel for the 1st quarter of 2004, career agents and independent broker-dealer firms dominated flexible-premium variable life sales, capturing 46% and 42% of the market, respectively.

Career agents and independent broker-dealer firms also dominated single-premium variable life sales in the 1st quarter of 2004, capturing 47% and 28% of the market, respectively. Regional firms captured 20% of the market, while wirehouses had 4% and banks had 1%.

As of March 31, 2004, total variable life assets for the companies reporting in VALUE were $97.9 billion, up 2% from $95.8 billion on Dec. 31, 2003. 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 March 31, 2004, approximately 74% of the variable life separate account assets were in stock funds; 10%, bond funds; 6%, money market funds; 7%, balanced funds; and 2%, specialty funds.

Fixed account interest rates on VL policies remained relatively unchanged. The average one-year interest rate on March 31, 2004, was 4.62%, down from 4.63% on Dec. 31, 2003. The average renewal rate on March 31, 2004, increased to 4.63% from 4.61% on Dec. 31, 2003.

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

Reproduced from National Underwriter Edition, June 11, 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.

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