Fixed Products Continue to Drive U.S. Life Insurance Sales

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Windsor, CT, November 26, 2002 — Led by continued strong interest in products with guaranteed returns, individual U.S. life insurance sales through the third quarter of 2002 registered gains in premium, face amount, and number of policies sold, according to LIMRA International’s quarterly survey.

“The continued turbulence in the stock market has sustained the year long ‘flight to fixed’ life insurance products,” said Elaine Tumicki, assistant vice president, product and distribution research. “Universal life (UL), whole life, and term all recorded substantial increases, with UL annualized premium up 20 percent for the third quarter and term and whole life up 15 percent and 7 percent, respectively. The success of these products continues to more than offset declines in variable life products.”

The result was an increase of 4 percent in annualized premium for the quarter and 3 percent year to date, compared to the same periods of 2001. Face amount and the number of new policies sold also registered increases, with face amount up 16 percent for the year and the number of policies sold up 4 percent. Results are based on data supplied by 80 companies and 68 of their subsidiaries.

“The success of universal life is widespread,” Tumicki said. “Two thirds of all UL writers and eight of the top 10 reported increases in the first nine months of this year, compared to the same period of last year. The average year-to-date increase for the top 10 UL companies is 38 percent.” The experience for term insurance is similar. More than two thirds of term writers and eight of the top 10 reported year-to-date increases in sales. The average year-to-date increase for the top 10 companies is more modest than UL, at 14 percent.

Sales of whole life are concentrated in fewer companies than are sales of other fixed products. Although nearly all of the participants in this survey sell a whole life product, the top 10 sellers account for more than 70 percent of sales, compared to less than 60 percent for UL and term. Nine of the top 10 whole life sellers reported year-to-date increases.

The results for variable universal life are virtually opposite those of fixed products. Variable life products account for an estimated 24 percent of new life premium in the industry for the quarter, the lowest quarterly share in five years.

Survivorship life sales appear to have stabilized overall, at least for now, with annualized premium recording a 2 percent increase compared with the third quarter of 2001. As is true with total life sales, UL is leading the way in sales growth, with annualized premium up 60 percent for the quarter and 27 percent for the year, compared to the same periods of 2001. Although variable survivorship products still account for the largest share of premium at 47 percent, UL, with a 40 percent share, is gaining ground. In 2001, variable products accounted for 59 percent of survivorship premium compared to only 28 percent for UL.

“The recent elections raise new questions about the future of survivorship life,” Tumicki said. “With Republican majorities in both houses of Congress, a permanent repeal will no doubt come up in the next legislative session. Whether or not such a measure would pass in the current economic climate remains to be seen, but the fact that the issue will be in the news once again will likely create more uncertainty among those potentially subject to the tax and this will likely stall any rebound in survivorship sales.”

Annualized Premium Market Share by Product
Estimate of Industry-wide Results
  2001 (Full year) 2002 (Year to date)
Universal life 21% 25%
Variable life 2 1
Variable universal life 31 25
Term 21 23
Whole life 25 26

Growth Rates by Product
Percent Change 2001-2002
    Annualized premiums Face Amount Number of policies
Universal life Third Quarter 20% 40% 26%
Year to date 32 35 25
Variable life Third Quarter -46 -41 -49
Year to date -46 -43 -47
Variable universal life Third Quarter -13 -18 -28
Year to date -19 -17 -24
Term Third Quarter 15 22 8
Year to date 16 23 9
Whole Life Third Quarter 7 12 -7
Year to date 12 15 -2
Total Third Quarter 4 16 1
Year to date 3 16 4