Hopefully marking the
beginning of a sustained upturn, sales in the US individual life
market recorded a solid recovery in the first quarter of the year.
Also on a rising trend, and setting all-time high records, are
insurance sales through bank holding companies. Charles Davis
reports.
Go deeper with GlobalData
After the most tumultuous period in
its history, the US life insurance market is beginning to show
tentative, yet promising signs of resurgence.
Sales for the entire industry and
for bank insurance sales each grew remarkably well in the first
quarter of the year, as anxious investors clearly view insurance
products – with the notable exception of fixed annuities – as a
safe harbour in troubled times.
The industry’s efforts to simplify
underwriting processes and cut through the arcane nature of many
insurance products, an effort years in the making, is beginning to
produce real dividends.
The industry breathed a collective
sigh of relief after financial industry consulting and professional
development organisation Limra reported that individual life
insurance sales increased by10% in the first quarter from a year
earlier.
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By GlobalDataLimra only reports dollar amounts
for annual sales, so no direct quarter-to-quarter performance
comparison is available. The numbers are still impressive, though
Limra was quick to warn that any widespread celebration is
premature.
Universal life sales
up
Universal life (UL) sales rose 17%,
and 65% of the companies that participated in the individual life
survey told Limra that UL sales had increased. The number of UL
policies sold was 21% higher than in the first quarter 2009. The UL
sales increase was the largest Limra has recorded since the third
quarter of 2002.
UL policies without guaranteed
death benefits grew by 30%, and the costlier coverage with death
benefit guarantees, rose 10%. Guarantees prevent policyholders from
accidentally under-funding their death benefits in these
flexible-premium products.
Even more impressive is the fact
that new indexed UL premium revenue was about 50% higher in the
first quarter than in the first quarter of 2009. New product
launches, sales of large policies, and focused sales campaigns
drove the indexed UL sales gains, Limra reported.
Whole life, the only major life
product category to show sales growth in 2009, continued its
growth, experiencing the next largest increase in first-quarter
sales. Whole-life sales were 15% higher than in the first quarter
of 2009. The increase in whole-life sales was the highest Limra has
recorded since the fourth quarter of 2002. Limra noted that the
majority of sales increases were by big mutual companies.
Variable universal life sales
increased 10%, but term sales fell 4% industry-wide. Fewer than
half of the participating carriers said they had increased term
life sales in the first quarter, Limra says.
Limra said that respondent
companies attributed the weakness in term life sales to price
increases on longer duration term products and return-of-premium
term products as a result of increased reserve requirements.
Meanwhile, the nation’s bank
holding companies (BHC) reported even stronger insurance revenue.
The American Bankers Insurance Association (ABIA) reported that US
banks recorded an increase of 38.5% in their total insurance
revenue from $10.88bn in 2008 to a record $15.08bn in 2009.
Citigroup, Bank of America and
Wells Fargo & Co led the BHC in total insurance income in 2009,
according to the report, produced for the ABA by the consultancy
Michael White Associates.
“Despite the soft property-casualty
market and tough economy, revenues from bank insurance activities
made a decent showing in 2009,” said Michael White, president of
Michael White Associates.
“For those bank holding companies
seriously engaged in them, insurance activities clearly continue to
make meaningful contributions to banking non-interest income and
net operating revenues.”
The study found that among the top
50 in insurance revenue, the mean ratio of the concentration of
total insurance revenue to non-interest income was 16.4% in 2009.
Among the top 50 in this concentration ratio, the mean was
46.6%.
During 2009, 609 BHCs (or 66.5% of
all large BHCs reporting) earned some type of insurance-related
revenue. Total BHC insurance revenue increased 11.1% from $42.53bn
in 2008 to $47.24bn in 2009, setting a record for bank insurance
sales. Both BHC insurance brokerage and underwriting reached record
levels of income in 2009.
“Bank insurance brokerage and
underwriting were both up last year,” said ABIA executive director
Valerie Barton.
“Banks managed to hold their own in
the overall generation of total insurance income and even establish
new revenue-records in both brokerage and underwriting. Overall,
the prospects for a resumption of long-term growth in bank
insurance revenues remain positive.”
Joining the top 50 in total
insurance revenue in 2009 were more than a few surprises, including
GMAC, Goldman Sachs, American Express, Morgan Stanley, Discover
Financial Services, the Armed Forces Benefit Association and NBT
Bancorp.
Fixed annuity news not so
bright
NBT Bancorp increased its rank in
total insurance income the most, having jumped from 83rd place at
the end of 2008 to 42nd by year-end 2009.
The PNC Financial Services Group
and International Bancshares Corporation each jumped 24 rungs of
the ladder, respectively, from 36th to 12th place and 72nd to 48th
place in the rankings.
The news was not nearly as bright
for fixed annuities. Banks’ fixed annuity sales fell 16% in the
fourth quarter from the previous quarter and 43% year over year,
according to fixed annuity research specialist Beacon Research’s
Fixed Annuity Premium Study. That followed a 13% drop from
the second to the third quarter.
Beacon’s figures are based on sales from 10 major banks,
representing 86% of total sales. Those banks sold $285.6m in fixed
annuities in the fourth quarter, versus $292.4m in the third
quarter. Only three of the 10 – Wells Fargo, SunTrust and M&T
Bank – managed to grow their fixed annuity business at all and each
produced single-digit, quarter-over-quarter growth.
