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Life Health > Life Insurance

Life Insurers Pass Financial Physical With Flying Colors

By Jim Connolly

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2004 financial statements show significant growth and strength

Life insurance companies passed their annual financial physical in 2004 with flying colors.

Results drawn from the 2004 financial statements bear witness to the renewed vigor of the industry.

Choose your measuring stick: net gains after dividends; admitted assets; premium income or total in-force business. The numbers collected from the NAIC annual statement database via National Underwriter Insurance Data Services/Highline Data all point in the same direction: up.

Take, for instance, net gains after dividends, which jumped 26% to $40.3 billion in 2004 from $31.9 billion in 2003 for the top 200 life insurers. Of that group, 21 companies experienced a 0-10% increase; 19, an 11%-25% increase; 20, a 26%-50% increase; and, 58, an increase of greater than 50%.

Declines in this category of up to 10% were posted by 18 companies; declines of 11%-25% by 20 companies; of 25%-50% by 18 companies; and, declines of over 50% by 26 companies.

The results of the top 20 insurers in this category are largely explained by increases in premium and net investment income. In the few instances among the top 20 where there was a decline in net admitted assets, the reasons for it ranged from a falloff in considerations for supplementary contracts to an increase in benefits paid out and an increase in reserving.

Kevin Ahern, a director with Standard & Poor’s Corp., N.Y., says the outlook for the industry is “stable” and that life insurers have “rebounded strongly” although there are “still pockets of concern.”

Those pockets, he continues, include the perceived aggressiveness of pricing on some products as well as compliance and regulatory issues such as the impact on companies of the C-3, Phase II risk-based capital project.

The growth in life insurance premiums is being bolstered by the growth in universal life products, he says, but some carriers are very aggressively pricing UL products for older age bands such as the 65-70 age class. With the advancement of Actuarial Guideline 38 at the National Association of Insurance Commissioners, it is more likely that there will be greater rationality, Ahern adds.

Another pocket that bears watching, according to Ahern, is the impact of any regional housing bubbles on the mortgage and real estate portfolios of life insurers’ asset portfolios.

The strength of real estate is an important factor to insurers. In fact, an increase in mortgage loans was a significant factor in the overall growth of admitted assets.

The admitted assets category experienced a handsome 11% increase in 2004 over 2003, growing to $4.03 trillion from $3.64 trillion, according to the NUIDS data.

Just over one-half, or 101 of the top 200, grew their admitted assets last year by up to 10%; 55, between 11%-25%; 9, between 26%-50%; and 9 saw growth of over 50%. Nineteen companies experienced declines of up to 10%; 4 saw declines of between 11%-25%; and, 3 had declines of between 26%-50%.

The reason for the increase in this category among the top 20 companies was overwhelmingly an increase in bonds held. An increase in first lien mortgage loans was also a reason that these companies’ assets grew. In 2 cases, multibillion-dollar increases in separate account assets contributed to increases in the totals. And, in 3 cases increases in cash or cash equivalents contributed to the increase in admitted assets.

However, 7 of the top 20 recorded drops in ready money.

Premium income increased 8% to $500.2 billion from $461.1 billion for the top 200 companies in 2004 over 2003. Premiums at 61 of those companies grew by up to 10%; 32 had increases between 11%-25%; 17, between 26%-50%; and, 12 greater than 50%. Thirty-four insurers had a decline of up to 10%; 26, a drop of 11%-25%; 10, a drop of between 26%-50%; and, 8, a decline of over 50%.

Group life premiums jumped by 13% to $27.7 billion in 2004 compared with $24.6 billion in 2003. Forty insurers posted increases of up to 10%; 25, between 11%-25%; 16, between 26-50%; and, 28 greater than 50%. Forty-three insurers had declines of up to 10%; 25, declines between 11%-25%; 14, between 25%-50%; and, 9, declines of over 50%.

For the top 200 life insurers in the individual life premiums category, growth averaged 12% in 2004 over 2003. Premiums increased to $104.7 billion in 2004 from $93.6 billion in 2003.

Sixty-eight of the top 200 grew their individual life premiums by up to 10%, while 27 increased 11%-25%; 9 grew between 26% and 50%; and, 16 posted growth in excess of 50%. Declines of up to 10% were registered by 49 companies, while 14 companies experienced declines of between 11%-25%; 9 had declines of between 25%-50%; and, 8 saw declines in excess of 50%.

Individual annuity premiums for the top 200 increased 7% to $167.3 billion from $156.6 billion. Twenty-eight of these top 200 saw annuity considerations increase by up to 10%; 22 grew at a rate of 11%-25%; 20 by 26%-50%; and, 29 by a rate greater than 50%.

Declines in annuity premium were posted by 19 companies who reported drops of up to 10%; 24, with declines of 11%-25%; 28, with declines ranging from 26%-50%; and, 30 companies with declines of over 50%.

For the top 200 companies, total in-force business increased 7% to $29.4 trillion in 2004 from $27.4 trillion in 2003. Group life in-force grew 4% to $8.66 trillion in 2004 from $8.29 trillion in 2003.

And, in the All Health category, which includes all types of health insurance reported, premiums earned grew 11.1% to $122.1 billion in 2004 from $109.9 billion in 2003. Total incurred claims during this period increased 9.06% to $88.2 billion from $80.9 billion during the respective 2004 and 2003 time frames.

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