Through the third quarter of 2005, dividends paid to policyholders were down 10% for the top 50 companies compared to the same period in 2004, according to statutory filings.
Total dividends paid by these companies for the first nine months of 2005 came to $11.6 billion compared with $12.9 billion in the first nine months of 2004, the data supplied by the NAIC Annual Statement Database via National Underwriter Insurance Data Services/Highline Data indicates.
In fourth quarter 2004, the top 50 paid out $3.7 billion, the data shows. If the same payout is assumed for fourth quarter 2005, then the full-year total would equal $15.3 billion, still down 8% from 2004′s $16.6 billion. Full-year 2005 data will not be available until after March 2006 when companies are required to file annual statements with insurance regulators.
“Lower total dividend payments are a result of several things occurring in the marketplace,” says Paul Graham, vice president-insurance regulation and chief actuary with the American Council of Life Insurers, Washington. “Low interest rates, such as those experienced in the last few years, will lead to lower dividend levels, while changes in mix of business between participating and non-participating products also will influence the total dividends paid by the industry,” he adds.
Of the top 50 insurers in this category, 28 experienced declines in dividends paid to policyholders.
Among the major insurers that showed declines are: Prudential Insurance Company of America, down 68%; John Hancock Life Insurance Company, down 39%; John Hancock Life Insurance Company (USA), down 34%; Metropolitan Life Insurance Company, down 25%; MONY Life Insurance Company, down 17%; and Massachusetts Mutual Life Insurance Company, down 10%.
In a statement, John Hancock says the “research does not take into account statutory accounting rules related to reinsurance.” It would not elaborate on the statement.
MONY’s decline can be attributed to two reasons, says AXA Group spokesperson Jeff Tolvin. MONY was acquired by AXA Financial in July 2004. The first reason, he says, is an adjustment to the interest rate factor used to determine the rate paid out.
The second reason, says Tolvin, is a reduction in the number of in-force policies since MONY’s demutualization. The block of business has been closed, he says.
The YTD decline recorded by MetLife is due to an accounting change, says Chris Breslin, a Met spokesperson. A total of $60 million in group life and health dividends were reclassified as premiums in line 1 of the company’s summary of operations, he says. The reason, Breslin explains, is that those group policies qualified for refunds, and it was determined by the company that they should not be called dividends. Rather, he continues, MetLife views them as a return of premium.
At press time, MassMutual had declined comment.