Life Insurance

US Life Insurance Premium Growth Pause Proves Temporary

Industry asserts a ‘pandemic-induced anomaly’

New research from S&P Global Market Intelligence shows a wide variety of outcomes among individual business lines against a challenging macroeconomic backdrop that is unlikely to lift in the near term.

Direct premiums and considerations among U.S. life insurers increased on a year-over-year basis in the third quarter, suggesting that the second quarter’s sizable decline represented a pandemic-induced anomaly. The overall growth rate for the life, annuity and accident-and-health business of approximately 0.9%, according to statutory data compiled and adjusted by S&P Global Market Intelligence, shows a wide variety of outcomes among individual business lines against a challenging macroeconomic backdrop that is unlikely to lift in the near term.

A normalization of premium volumes in certain key business lines, particularly ordinary individual annuities, proved key to the near-breakeven outcome.

The second quarter’s 7.7% decline in total-filed direct premiums and considerations was fueled, in part, by a 20.4% plunge in ordinary individual annuity business volume. In the third quarter, ordinary individual annuity direct premiums and considerations fell for a second-straight quarter, but by a much more modest 3.3%. Business volume remains down by 9.7% for the first nine months of 2020.

The trends in ordinary individual annuity premiums and considerations, which include both new and renewal business, compared favorably to results in LIMRA’s Secure Retirement Institute U.S. individual annuities sales survey. Rates of decline for the quarter and year-to-date period as reported in that survey were 7% and 13%, respectively. While survey results showed favorable comparisons for fixed-rate deferred and registered index-linked annuities in the third quarter, most other product categories experienced declining sales. Fixed-indexed annuities, which accounted for 29.3% of individual annuity sales in the third quarter of 2019, experienced declines of 29% for the quarter and 27% for the year-to-date period.

253% Growth In Annuity Premiums

Massachusetts Mutual Life Insurance Co., the leading seller of fixed-rate deferred annuities through the first nine months of the year, according to the Secure Retirement Institute, posted growth of 253.5% in ordinary individual annuity premiums and considerations in the third quarter. Its expansion was outdone, however, by Midland National Life Insurance Co., which generated growth in the business line of 351.2% for the period.

Direct premiums and considerations among U.S. life insurers increased on a year-over-year basis in the third quarter, suggesting that the second quarter's sizable decline represented a pandemic-induced anomaly...

Group annuity premiums and considerations remained 10.3% above those produced in the year-earlier period, despite having declined in both the second and third quarters on a year-over-year basis. First-quarter strength in the group annuity line reflected an influx into stable-value products by participants in employer-sponsored benefit plans during a time of intense financial market volatility.

The year-over-year comparison in the ordinary life business suggests that appearances can be deceiving.

On an unadjusted basis, direct ordinary life premiums fell by 4.9% in the third quarter. But that comparison is materially understated as a result of two items: a third-quarter 2019 reclassification of certain corporate-owned and bank-owned life insurance business by MassMutual to individual life from group life and an adjustment to the value entered for Lincoln National Life Insurance Co. for the first three quarters of 2020 on Exhibit 1 of its quarterly statement.

After eliminating MassMutual’s production from the industry comparison and revising the Lincoln National Corp. subsidiary’s year-to-date ordinary life direct premiums to $4.72 billion from an originally filed $3.12 billion, the third quarter’s ordinary life comparison swings to growth of 1.1%.

Fastest Group Life Growth Rate Since 2017

In the group life line, taking out MassMutual’s results for the past two third quarters changes the industry’s rate of growth in direct premiums to 4.7% from 13.1%. The latter figure would have amounted to the fastest group life growth rate since the fourth quarter of 2017. Both compare favorably to the second quarter’s 8.2% decline.

LIMRA’s U.S. Retail Individual Life Insurance and Individual Disability Insurance Sales Summary Reports showed a 2% year-over-year increase in new annualized life insurance premium in the third quarter, with strength in variable universal, whole and term life production offsetting weakness in universal life.

Growth in death benefits, which increased by a double-digit percentage for a third straight quarter, has captured as much attention as life industry premium growth amid ongoing reviews of excess deaths directly and indirectly attributable to COVID-19. The pandemic has directly impacted premium growth in the accident-and-health lines, particularly as some carriers offered premium credits to individual and group policyholders during the spring due to low utilization of products such as dental insurance.

Premium growth of 7.5% in other accident and health and 4.6% in group accident and health in the third quarter suggest a return to normalcy, however, after second-quarter results that showed an increase of 5% and a decline of 2%, respectively.