Life Story: Ups and Downs Cancel Out, Universal Life Comes on Strong, LIMRA Says

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Windsor, CT June 5, 2002 — Individual life insurance sales in the
first quarter of 2002 saw sustained growth in fixed products – universal life (UL),
whole life, and term, – a continued slide for variable products, and a net 1 percent
decline in annualized premium compared with the first quarter of 2001, according to LIMRA
International. At the same time, face amount and number of policies sold increased 14
percent and 5 percent, respectively. Strong sales of term insurance, which account for 66
percent of face amount and 42 percent of policies sold, drove the increases. Without term,
face amount and policy count would be even with last year. The results are based on a
survey that tracks new individual life insurance sales for 81 companies and their 74 subsidiaries.

“The number of policies sold increased 5 percent
compared to the first quarter of 2001,” said Elaine Tumicki, assistant vice president
of product research for LIMRA. “But the first quarter sales in the past two years
were affected by the rise (in 2000) and fall (in 2001) of term sales surrounding the
implementation of Regulation XXX. While the policy count in first quarter 2002 is up 5
percent compared with 2001 and down 9 percent compared with 2000, it is even with first
quarter 1999, which was before Regulation XXX affected sales.”

While overall annualized premium in the first quarter was
close to the same as last year (down 1 percent), there were no middle-of-the-road results
for individual products. All products registered double-digit changes in annualized
premium compared with the first quarter of 2001. Continuing a trend started in 2001, fixed
products – UL and whole life – recorded strong growth in the first quarter of
2002. UL annualized premium is up 27 percent compared withthe first quarter of last year
while whole life is up 12 percent. Fixed products continue to have more appeal in the weak
stock market environment.

Variable products – variable universal life (VUL) and
variable life (VL) – continue their downward trend, no doubt a result of the
less-than-stellar performance of the stock market. VUL annualized premium was down 22
percent compared with first quarter last year while VL dropped 52 percent. Variable
products tend to track closely with returns in the stock market, in particular, the
S&P 500 Index. If the S&P 500 increases, watch for variable products to increase
their share of sales about a quarter later.

Term insurance has recovered from the post-Regulation XXX
sales doldrums and recorded a 16 percent increase in annualized premium compared with the
first quarter of 2001. Furthermore, although first quarter 2002 term premium is down 12
percent compared with the XXX-induced sales peak in the first quarter of 2000, term
premium is up 34 percent compared with the pre-XXX sales level in first quarter 1999. In a
recent LIMRA survey, leading term writers predicted moderate-to-strong growth for term
insurance over the next five years. It appears that sales are heading in that direction.

“Survivorship life sales are still reeling from the
estate tax turmoil in Washington,” Tumicki noted. “Premium, face amount, and
policy count all registered declines of more than 25 percent.” Under current law,
estate taxes are repealed for only one year (2010) so it is likely most estates of
high-net-worth individuals will be subject to estate taxes (and could use survivorship
life to pay those taxes). But since the issue of permanent repeal keeps coming up in
Congress, sales have not rebounded to pre-repeal levels.

Growth Rates by Product 2001-2002
  Annualized premiums Face amount Number of policies
Universal life 27% 20% 14%
Variable life -52% -49% -47%
Variable universal life -22% -16% -20%
Term 16% 20% 9%
Whole life 12% 19% 6%
Total -1% 14% 5%

Source: LIMRA International, individual life insurance sales survey first quarter of 2002.