Whole Life and Universal Life Lead the Charge
By Wayne DaltonSNL Financial
Massachusetts Mutual Life Insurance Co. outpaced other insurers with a 17.9% increase in life insurance direct premiums year over year for the six months ended June 30.
This was the largest percentage increase among the top 10 U.S. life insurers, based on an analysis performed by SNL of total direct premiums written, which include first-year, single and renewal premiums. In an Aug. 17 earnings release, MassMutual attributed the increase to “whole life, universal life and bank-owned life insurance sales.”
Life insurance premiums, consisting of ordinary and group life, are concentrated among a small number of companies, with 49.9% of premiums written by the 10 largest top-tier insurance entities. SNL groups MetLife Inc.,Northwestern Mutual Life Insurance Co., Prudential Financial Inc. and New York Life Insurance Co. account for almost one-third — 31.2% — of all life premiums.
Total direct premiums reflect premiums collected on new business as well as in-force business. Adjustments to the rankings in market share were made to account for significant non-U.S. business at subsidiaries of MetLife andAflac Inc. (For more details, see the methodology section below.)
MetLife continued its domination of the life insurance market, with a market share of 10.1%. Northwestern Mutual, Prudential and New York Life took the next three spots in the rankings. Year-over-year increases in premiums of 3.9% for Northwestern Mutual and Prudential allowed the companies to continue to incrementally narrow the gap with MetLife.
Manulife Financial Corp. announced a 17% increase in sales of life insurance in its Aug. 9 earnings release. This differs from the 7.8% increase in life premium according to SNL data because SNL measures the increase in total premium, while the company measures the increase in new sales figures. Manulife noted that life sales were driven by products with reduced risk and higher return potential.
Market share outside the top four insurers is competitive, with only a 114-basis-point difference in market share between the insurers ranked in the fifth to 10th positions.
New York Life reported an increase in recurring life premium in an Aug. 21 press release, but total life premium for the company declined 8.7%. The decline is due to a decrease in single premiums for individual life insurance, as seen in the Part 1 filings prepared by New York Life for the six months ending June 30, 2011, and June 30, 2012. The company indicated in the management discussion and analysis portion of its 2011 annual regulatory filing that bank-owned life insurance and single premium variable universal life sales were declining.
The 7.5% decline at Lincoln National Corp. included a sharp drop in the first quarter, with premiums down 6.8% year over year. During the company’s second-quarter earnings call, President and CEO Dennis Glass indicated that the decline was expected. He said the company “continued to be a leader in implementing pricing actions that respond to the low interest rate environment” and that Lincoln is “committed to taking additional action if conditions require us to do so.”
Methodology behind the rankings
The ranking includes both SNL groups and companies independent of a group. To address the impact of foreign currency conversions for entities with a significant amount of business written outside the U.S., SNL adjusted the rankings to exclude such entities. As a result, American Life Insurance Co. (DE) and American Family Life Assurance Co. of Columbus were excluded, affecting the ranking of SNL groups MetLife and Aflac.
Ordinary life insurance refers to term insurance and all forms of permanent insurance (e.g., universal, variable, variable universal, whole) sold to individuals. Often offered through the workplace, group life insurance is typically term insurance and allows members of a group to purchase coverage up to a certain level without the need for underwriting.
SNL uses statutory total direct premiums to determine market share. Total premium is a preferred indicator of market share as it not only reflects new business but also the persistency of a company’s existing business in the form of renewal premiums. Additionally, many policyholder acquisition costs are not recovered within one year. As such, total premium can also be a better indicator of profitability for life insurers, whereas new sales do not necessarily equate with profitability.
LIMRA is often cited by insurers when computing market share, but LIMRA only reports on new sales. LIMRA’s standard definition of new sales is annualized new premium, which is based on 100% of new recurring premiums and 10% of single premiums.
Rankings exclude certain New Jersey-domiciled life subsidiaries that, due to local regulations, do not file quarterly statements with the NAIC. The impact to the rankings and industry totals are immaterial.