Principal Puts More Term Life Insurance in Force

Principal Financial Group was providing $446 billion in individual life insurance protection at the end of June, or 12% more protection against death than it was providing a year earlier.

The Des Moines, Iowa-based life insurer increased the amount of protection it was providing through individual universal life and variable universal life by 3.1%, to $95 billion.

The life insurer increased the amount of protection it was providing through term life and whole life by 15%, to $351 billion.

The company did that while sending about 92% of its workers to work at home, because of COVID-19, and while turning a profit.

Resources

• Links to Principal earnings documents are available here.
• An earlier article about Principal’s earnings is available here.

The company is reporting $416 million in net income for the second quarter on $3.1 billion in revenue, compared with $392 million in net income on $4 billion in revenue with the second quarter of 2019.

Sales

Here’s what happened to U.S. sales of certain types of products, when compared with the second quarter of 2019, in terms of annualized premium revenue:

• Group dental and vision: $24 million (up from $33 million)
• Group life: $8.6 million (down from $11 million)
• Group disability: $13 million (down from $15 million)
• Individual disability: $15 million ($14 million)
• Universal and variable life: $29 million (down from $42 million)
• Traditional life: $21.1 million (about flat)

Sales Commissions

Like other insurers, Principal lumps much of its sending on producer compensation in lines related to “deferred acquisition costs,” or DAC, that include other sales-related spending.

But the stand-alone item for U.S. specialty benefits commissions decreased to $67 million in the second quarter, from $69 million in the year-earlier quarter.)

U.S. individual life commission spending decreased to $28 million, from $30 million.

COVID-19 Claims

Principal ended up with about $68 million in extra benefits unit operating profits because of COVID-19-related reductions in spending on dental care and vision care.

The company’s life insurance operations have received about $14.7 million in COVID-19-related life insurance claims.

Assets

Principal executives made a point of saying in the first quarter that they had piled up $3 billion in cash, in case death claims or increased investment market volatility made having a big pile of cash important..

Principal still has $3 billion in cash and liquid assets, and it faces no pressure to sell assets at bad prices just to raise cash, according to a slidedeck the company prepared for investors.

But investment yields on the assets were poor. Partly because of low interest rates, Principal’s annualized investment yield, before tax, fell to 4.1% in the latest quarter, from 4.8% in the year-earlier quarter.

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