The Industry In 2003: Strong In Some Areas, Less So In Others

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Just how life insurers measured up in 2003 depends on the measuring stick you use.

In categories such as net gain, net admitted assets and in-force totals, the new mark on the wall recorded a dramatic growth spurt. However, the premium income categories suggested a plateau had been reached.

Net Admitted Assets

Net admitted assets for the top 300 life insurers increased 14.2% to $3.77 trillion in 2003 compared with $3.3 trillion in 2002. Thirty-one companies experienced increases in net admitted assets of over 30%; 14, over 50%; and 4 companies, over 100%.

Assurity Life Ins. Co. witnessed a whopping 510% increase to $1.06 billion in 2003 compared with $174 million in 2002. Another insurer that added asset muscle is Federal Kemper Life Assurance Co., whose net admitted assets grew to $5.8 billion in 2003, up from $2.1 billion in 2002.

Two other companies, Washington National Insurance Corp. and Scottish Re U.S., Inc., also turned in 100%-plus increases. Washington Nationals net admitted assets grew 124% to $2.04 billion from $911 million and Scottish Re U.S.s tally grew to $1.07 billion from $528 million.

Some 77 companies saw net admitted assets increase between 15-29%, and 37 companies grew in the 10-15% range.

Thirteen companies experienced declines in net admitted assets including a 42.7% drop posted by the U.S. business of Canada Life Assurance Co.; a 22.2% drop by Business Mens Assurance Co. of America; a 19.3% decline by Hartford Life Group Ins. Co.; and a 10.1% reduction by Clarica Life Ins. Co. (U.S.).

Net Premium Income

Net premium income, which starts with direct written premium and then takes into account reinsurance assumed and ceded, inched up 1% in 2003 over 2002. The growth was a slightly better 3% for direct written premium, a measure that looks only at what companies write.

The disparities between the two measures sometimes can be startling.

For instance, regarding net written premium, Federal Kemper Life Assurance Co. posted a 2,302% increase; Berkshire Hathaway Life Ins. Co., a 1,801% increase; and, Loyal American Life Insurance Co., a 513% increase. But if direct written premium is used, Federal Kemper would have shown a 1% increase; Berkshire Hathaway, a 1,628,602% increase; and, Loyal American, a decline of 5.75%.

In the case of Federal Kemper net premium was bolstered by reinsurance assumed which increased over 13 million percent. Berkshire Hathaway Lifes increase in net premium was almost entirely from growth in direct written premium. Loyal Americans net premium was bolstered by an 89.2% decline in reinsurance ceded.

Other companies that had significant disparities in year-over-year percentage changes between direct written and net premiums include: AIG Annuity Ins. Co., Assurity Life Ins. Co., Aviva Life Ins. Co., Hartford Life Ins. Group., Southland Life Ins. Co., Swiss Re Life & Health America, Inc. and Washington National Ins. Co.

That said, most insurers had minimal or no discrepancies between direct and net premiums. Additionally, the year-over-year percentage changes suggest that 10 companies saw increases of between 50-100%; 23 companies had increases between 30-50%; 30 companies saw growth of between 15-29%; and, 28 insurers witnessed growth of between 10-15% in net written premium.

In spite of some handsome increases, 119 companies saw drops in net premium written. If direct written premiums are used as a measure, the top 300 fared slightly better with only 107 companies posting declines.

Net Investment Income

Net investment income for the top 300 companies chugged along with a 3% increase in 2003 over 2002.

Seven companies posted gains of 100% or better in the year-over-year comparisons. They are: Sun Life Assurance Co. of Canada (U.S.), 496%; Assurity Life Ins. Co., 494%; Chase Life & Annuity Co. of N.Y., 371%; Blue Cross & Blue Shield of Florida, 276%; Washington National Insurance Company, 175%; Scottish Re U.S., Inc., 120%; and, Life Insurance Company of the Southwest, 101%. The most common reason for these sizeable jumps was increased income from government and affiliate bonds.

Other companies experienced double-digit declines in net investment income in 2003 over 2002. United Insurance Company of America dropped 71%; Scottish Re Life, 64%; Country Investors Life Assurance Company, 48%; Allmerica Financial Life & Annuity, 42%; Combined Insurance Company of America, 41%; Jefferson National Life Insurance Company, 32%; and, Kemper Investors Life Insurance Company, 29%.

Among the reasons for the decline in investment income: drop in income from common stock and bonds of affiliates and non-affiliates; and income from derivatives.

Individual Life and Annuity Premiums

For the top 300 companies in both the individual life premiums and the individual annuity premium categories, there were slight declines of 1% in 2003 compared with 2002.

In both categories it was the size of the movement from the previous year, either in a positive or negative direction that was most evident. Individual life premium increases that were double-digit or better were registered by 72 companies, while 68 companies posted declines of at least double-digit percentages over 2002.

Two companies had 2003 percentage increases of 1,000% or better. Six insurers had individual life premium increases of 100% or better and 64 companies posted double-digit increases. One company posted a 130% decline over 2002 while 67 posted double-digit declines.

For individual annuity considerations, the contrast was even more apparent. Increases that were double-digit or better were posted by 120 companies. Twelve companies had 1,000%-plus increases and 32 companies had increases over 2002 that ranged from between 100-1,000%.

A total of 125 companies had percent declines that were double-digit or more. One had a decline of over 1,000% and another, a decline of nearly 500%. But for the remaining 123 companies with double-digit declines, year-over-year percent changes ranged from declines of 10%-97%.

Group Life Premiums

Group life premium was a 50-50 proposition with percentage increases and decreases over 2002 roughly even. A total of 152 companies posted increases, 8 remained unchanged and the remainder posted declines. Overall, totals for the top 300 companies declined by 3% in 2003 compared with 2002.

Both No. 1 ranked Metropolitan Life and No. 2 ranked Prudential posted respective declines of 4% and 6% due to decreases in direct written premium. A large increase in direct written premium helped fuel the 82% growth for Massachusetts Mutual Life over 2002.

Indeed, when there were large changes in group life premium over 2002, the cause was more than likely due to changes in direct written premium. UNUM Lifes 11% increase was due to an increase in direct written premium. Minnesota Mutual Life and New York Life posted respective 24% and 17% increases due both to direct written premium and reinsurance assumed.

In practically all of the instances where there were 100%-plus changes year-over-year, the differences resulted from direct premium written. For some companies, however, there were other factors causing their changes. Reinsurance assumed explained the change for RGA Reinsurance Company, Golden State Mutual Life and Valley Forge Life. Reinsurance along with a decline in direct written premium, partially explained year-over-year changes for Transamerica Occidental. And, in several instances, such as Unity Financial Life and Allianz Life Insurance Company of N.Y., changes in reinsurance ceded affected group life premium totals.

Net Gain

Net gain from operations after dividends to policyholders and federal taxes, and before capital gains and losses, grew 62% in 2003 compared with 2002 for the top 300 ranked companies. A total of 175 companies posted increases, 2 remained unchanged, 43 companies went from a negative to positive number and were not counted for percentage changes, and the remainder posted declines.

What is noteworthy in comparing the percentage changes in 2003 over 2002 is the size of the differences. Two companies posted an increase of over 1,000%; 8 companies had over 500% growth; 52 insurers had increases of between 100%-500%; 31 grew between 50-100%; and, 57 grew between 10-50%. Percent declines over 2002 ranged from a drop of -5% to -93%.

The top five companies in the category and their percent changes in 2003 over 2002 are as follows: Metropolitan Life, down 23%; Prudential, up 89%; Teachers Insurance and Annuity Association of America, up 45%; United Healthcare, up 70%; and AFLAC, up 76%.

Factors contributing to MetLifes drop included a decline in net investment income, an increase in death benefits and annuity benefits paid, and an increase in general insurance expenses as well as dividends paid to policyholders.

Prudentials increase can be attributed to a change in surrender benefits and other withdrawals from life contracts, a decline in general expenses, a decrease in aggregate reserves as well as a decrease in dividends to policyholders.

At TIAA, a lower increase in aggregate reserves for contracts as well as lower dividends paid to policyholders helped bolster net gains. While at United Healthcare as well as AFLAC, an increase in premium income and to a lesser degree an increase in net investment income contributed to the growth in net gains.

Total In-Force

Insurers fared well regarding total in-force business, with 183 posting positive increases, 5 remaining unchanged, 3 not having a 2002 number for comparison, and, the remainder posting negative changes. For the top 300 insurers, the total in-force business increased 10% in 2003 compared with 2002.

Leading the pack was MetLife which grew 8%; Prudential with 5% growth; Swiss Re with 11%; RGA Reinsurance with a 38% increase; and Northwestern Mutual with 8% growth.

Group Life In-Force

The top 300 witnessed 5% growth in group life business in-force. A total of 141 companies had increases, 14 remained unchanged, 5 did not have any in-force group life business in 2002, and the remainder experienced negative changes.

Among the top 5 companies, No. 1 ranked MetLife grew 10%; Prudential, which passed the $1 trillion mark, grew 7%; UNUM, 7%; Aetna, 16%; and Hartford Life & Accident, 2%.

Companies posting large increases were: Canada Life Ins. Co. of New York, with an 8,879% increase; Standard Life Ins. Co. of New York with a 920% increase; and Healthy Alliance Life Ins. Co. with 690%.

Individual Life In-Force

For the top 300 companies as measured by individual life in-force, totals grew 12% in 2003 compared with 2002. A total of 193 companies experienced increases over 2002; 98 declines; and 3 others did not have comparable numbers.

The top 5 companies in this category posted the following increases: Swiss Re, 12%; RGA Reinsurance, 38%; Northwestern Mutual, 8%; Lincoln National, 9%; and, Security Life of Denver, 21%.

Large increases were reported by Assurity Life with a 1,683% increase; Berkshire Life with a 904% increase; and Washington National, with a 514% rise.


Reproduced from National Underwriter Edition, August 12, 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.