With a record $20.2 billion of operating earnings in the first nine months of 2005, the 100 largest U.S. life insurance companies, accounting for 84% of industry assets, paid shareholder dividends of $16.3 billion (an 81% payout ratio).
Additionally, corporate reorganizations for The Townsend 100 reduced previous surplus paid in by another $5 billion. The sum of shareholder dividend payments and a reduction in surplus paid in (by seven companies) totaled 105% of operating earnings.
Movement of capital from the life industry was demonstrated in nine months of 2005 by only 22 of The Townsend 100 Companies paying in new surplus, the lowest total since 19 companies in 2001, while 45 companies paid shareholder dividends, tying a record high set in 2001.
Large shareholder dividend payments and surplus declines included: MetLife, $3.2 billion with surplus down 11%; Travelers Insurance, $1.5 billion with a 44% surplus decline; Prudential Insurance, $1.5 billion with surplus off 8%; Metropolitan Tower, $0.9 billion with a 43% surplus decline; and Farmers New World, $0.6 billion with surplus down 42%.
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Also, Connecticut General, $0.5 billion with a 6% surplus decline; Hartford Life & Accident, $0.5 billion with surplus off 17%; SunAmerica, $0.5 billion with a 3% surplus decline; Hartford Life, $0.4 billion with surplus down 1%; Transamerica Life, $0.4 billion with a 12% surplus decline; and GE Capital, $0.4 billion with surplus off 4%.
Data produced by Insurance Consulting & Analysis, LLC, shows operating earnings rose 5.7% from $19.1 billion to $20.2 billion, but shareholder dividends doubled from $8 billion to $16.3 billion from nine months of 2004 to nine months of 2005. Just the 11 companies listed above paid more than $10 billion in shareholder dividends.
Total surplus funds for The Townsend 100 Companies rose 2.3% in the third quarter of 2005, but a second-quarter decline in surplus held nine-month surplus growth to 2.6%.
Table 1 shows the components of surplus changes for The Townsend 100 Companies for the five years 2000-2004, and for the first nine months of 2005. Surplus includes the asset valuation reserve and the interest maintenance reserve, while operating gain excludes amortization of the interest maintenance reserve.
Based on the nine-month data, it appears that current operating earnings of $20 billion are on track to exceed the yearly record of $26.8 billion set in 2004.
Table 2 shows new surplus paid in, shareholder dividends paid out and the net result for The Townsend 100 for the years 1997-2004 and for nine months of 2005.
Based on the nine-month data, the current shareholder dividends of $16.3 billion may break the yearly record of $18.9 billion paid in 2001, a year of major demutualizations and special one-time shareholder dividend payments by the new stock companies.
The nine months of 2005 net surplus paid out (excess of shareholder dividend payments over surplus paid in) of $19.5 billion already exceeds the yearly record $9.4 billion of net surplus paid out in 2004.
Table 3 shows net investment yield on mean invested assets, return on mean equity and the capital ratio (total surplus to invested assets) for The Townsend 100 Companies for the full years 1997-2004 and for nine months of 2005.