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Biggest Insurers' Death Benefits On Track

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Year-to-date death benefits (though Sept. 30, 2005) paid out by the top 50 insurers remained on track with full-year 2004 payouts, according to data gathered from annual statement filings.

The information from the National Association of Insurance Commissioners Annual Statement Database via National Underwriter Insurance Data Services/Highline Data looks at 2005 data through the end of the third quarter and full-year 2004 and 2003 data.

Year-to-date benefits in 2005 totaled $27.4 billion for the top 50, 79% of the $34.5 billion 2004 total death benefits paid out by these companies. In 2004, death benefits paid out by the top 50 grew 2% over 2003′s $33.9 billion total.

Although fourth quarter 2005 financial statements are not yet available, at the end of the third quarter, several companies were well over 75% of their 2004 totals with a 4% increase in 2005 over 2004. However, some data suggests that people tend to live through the holidays. If it proves so in 2005, fourth quarter data could lower full-year 2005 data to a level comparable to 2004.

Scottish Re (U.S.)’s total at the end of the third quarter stood at 577% its 2004 total; RGA Reinsurance Company at 119%; John Hancock Life Insurance at 98%; Munich American Re at 91%; First Colony Life and Principal Life both at 88%; American Life at 87%; Monumental Life at 87%; and, MassMutual and Standard Insurance, both at 86%.

If the $333 million increase in Forethought Life Assurance Company’s total is removed from the 2004 death benefit total, the increase would be nearly flat at .89% for benefits paid out in 2004 compared with 2003. A Forethought spokesperson says all in-force business was moved to Forethought Life Assurance Company from Forethought Life Insurance Company and Arkansas National Life at the end of 2003.

The American Council of Life Insurers, Washington, also found that benefits paid remained constant in 2004 over 2003. In its 2005 Fact Book, it says that for all life insurers, $52 billion in benefits were paid to beneficiaries of policyholders who died, unchanged from 2003. Of the $52 billion total, according to the ACLI Fact Book, $32 billion or 62% were benefits paid from individual life insurance contracts. Group life payments represented $19 billion or 36%. Short-term individual and group credit life represented $646 million in payments.

The life insurance industry is expecting and preparing for a time when, as baby boomers age, there will be an increase in claims, says Jack Dolan, an ACLI spokesman.

In written comments, MIB Group spokesperson David Aronson, notes that Medical Information Bureau numbers reflect application volume rather than benefits paid.

He quotes MIB’s Chief Knowledge Officer Stacy Gill: “As face amounts increase on new issues [LIMRA numbers bear this out], isn’t it reasonable to assume that after some lag, death benefits would follow suit?”

As a percentage of premiums and considerations received by the top 50, benefits paid again showed consistency, according to the NAIC/Highline data. The year-to-date 2005 premium/benefits paid ratio through third quarter totaled 10%, comparable with full-year 2004′s 10% and roughly comparable to full-year 2003′s 11%.

Looking at YTD 2005 results through third quarter and comparing it with YTD 2004 results for the same time frame, benefits paid out by the top 50 increased 4% to $27.4 billion from $26.2 billion.

In some cases, increases reflected changes at the company.

For instance, Prudential Financial, Newark, N.J., experienced a 14% decline in death benefits paid for both 2004 over 2003 and in year-to-date 2005 over year-to-date 2004. When Prudential demutualized, it closed off a block of life insurance and annuity contracts, according to Laurita Warner, a Prudential spokesperson. Over time, Prudential has been reinsuring that block, which is reflected in the decline in death benefits paid, she explains.

And such was the case in 2004 for Fort Dearborn Life Insurance Company, which paid out 67% more in 2004 than it did in 2003. The reason was a merger of its Ohio Medical Life Insurance Company unit, which a company spokesperson says would have given Fort Dearborn pro-rata 2003 benefits paid of $326.4 million. The increase in 2004 was really $16 million, the result of mortality experience from two large cases written in Texas, the spokesperson adds.


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