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Life Health > Life Insurance

1Q 2005 Variable Life Sales Slid 16%

By Gabby Cui

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Variable life experienced a considerable downturn in sales in the 1st quarter of 2005 compared to the 4th quarter of 2004, even taking into account the seasonality trend that life insurance sales typically exhibit. In addition, sales for the 1st quarter of 2005 were lower than 1st quarter 2004 sales.

VL sales with single premiums included at 10% for the 43 companies reporting in Tillinghast’s VALUE survey for 1st quarter 2005 were $629 million. This is a 15.7% decrease from 4th quarter 2004 sales, which were $746 million, and a 5% increase from 1st quarter 2004 sales, which totaled $665 million.

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

The market estimate for the 1st quarter of 2005 with single premiums included at 10% is $650 million.

VL sales with single premiums included at 100% for the 43 companies in the VALUE survey for 1st quarter 2005 were $640 million. This is a 6% decrease from 1st quarter 2004 sales, which were $682 million, and almost a 16% decrease from 4th quarter 2004 sales, which amounted to $760 million.

The market estimate for the 1st quarter of 2005 with single premiums included at 100% is $675 million.

For the 1st quarter of 2005, the top 5 companies/fleets–IDS, Hartford Life, Pacific Life, MetLife and AXA Financial/MONY–captured 43% of all VL sales (including single premiums at 10%), while the top 10 companies/fleets garnered 68% of VL sales. For the 1st quarter of 2005, MetLife ranked among the top 5, displacing Nationwide, which now ranks 7th. Lincoln National now ranks among the top 10 companies, displacing ING.

For the companies in the survey, the number of flexible premium contracts issued during the 1st quarter of 2005 increased 7% over the number issued during the 1st quarter of 2004. The average face amount increased 1% to $334,166, while the percentage of premium allocated to the general account decreased to 6%.

The single premium variable life market continues to suffer. The total premium for single-premium products for the 6 companies in VALUE for the 1st quarter of 2005 was $8 million, compared to $12 million for the 1st quarter of 2004.

The number of single premium contracts issued during the 1st quarter of 2005 was 29% lower than the number issued during the 1st quarter of 2004. The average face amount increased 14% to $165,785, while the average premium decreased 9% to $57,143.

The total premium from all second-to-die products issued during the 1st quarter of 2005 for the companies in the survey was $66.9 million, compared to $82 million during the 1st quarter of 2004.

The number of second-to-die contracts (including single-premium and flexible-premium products) issued during the 1st quarter of 2005 increased 54% from the 1st quarter of 2004. The average face amount decreased 26% to $1,625,227.

For the companies reporting sales by distribution channel for the 1st quarter of 2005, career agents and independent broker-dealer firms dominated flexible premium variable life sales, capturing 54% and 36% of the market, respectively.

Career agents and independent broker-dealer firms also dominated single premium variable life sales in the 1st quarter of 2005, capturing 47% and 31% of the market, respectively. Regional firms captured 17% of the market, while wirehouses had 3% and banks had 2%.

As of March 31, 2005, total variable life assets for the companies reporting in VALUE were $102.5 billion, down 3% from $105.3 billion on Dec. 31, 2004. 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, 2005, approximately 74% of the variable life separate account assets were in stock funds; 11%, bond funds; 5%, money market funds; 7%, balanced funds; and 3%, specialty funds.

Fixed account interest rates on VL policies remained relatively unchanged. The average one-year interest rate on March 31, 2005, was 4.27%, down from 4.31% on Dec. 31, 2004. The average renewal rate on March 31, 2005, decreased to 4.68% from 4.71% on Dec. 31, 2004.

Gabby Cui is with Towers Perrin, of which Tillinghast is a business. She can be reached at [email protected].

6 companies in the survey reported single premium VL sales of $8 million in 1Q 2005

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