Fixed Life Insurance Products Continue to Hold Sway While Overall Sales Decline

Windsor, CT, June 6, 2003 � The positive sales growth of individual life insurance in 2002 has not carried over through the first quarter of 2003, with an overall decline in annualized premium, face amount, and number of policies sold, according to LIMRA International’s quarterly report of U.S. individual life insurance sales. At the same time, universal life and whole life products continued to gain market share at the expense of variable products.

“Individual life insurance ended 2002 with the first increase in the number of policies sold in nearly two decades,” said Elaine Tumicki, corporate vice president and head of product research for LIMRA. “That positive sign has not carried over into 2003.”

In the first quarter of this year, sales decreased across the board compared with first quarter 2002, with annualized premium and face amount both down 3 percent and the number of new policies sold down 6 percent. While overall annualized premium is down for the quarter, individual company results varied significantly. Among the top 10 companies in the survey, annualized premium growth rates ranged from a 37 percent increase to a 19 percent decrease. The survey results include 75 companies and 74 of their subsidiaries

Fixed products continued to gain market share at the expense of variable products. Universal life (UL) annualized premium was up 27 percent compared to first quarter 2002 (which was up 29 percent over first quarter 2001). Nine of the top 10 UL companies and 18 of the top 20 reported increases in premium in the first quarter.

Whole life annualized premium was again up by double digits (+10 percent), after an increase of 12 percent in first quarter 2002. Success with whole life is also fairly widespread, although not quite as much so as with UL � eight of the top 10 whole life companies and 13 of the top 20 reported gains. Term insurance sales were about even with last year, with a 1 percent increase.

“While fixed products fared well in the first quarter, variable life products continued to tumble, with annualized premium down 35 percent compared with the first quarter of last year,” Tumicki said. Variable universal life (VUL) and variable life (VL) dropped from an estimated 28 percent of new premium in the first quarter of 2002 to 19 percent in the first quarter of 2003.

“Variable product market share has followed trends in the S&P 500 closely over the last several years,” Tumicki noted. (See graph) “Given that there have been some positive signs in the stock market lately, it will be interesting to see if there is an up tick in variable product sales later this year.”

Survivorship life sales continued to wane in the first quarter, with a decline of 11 percent in annualized premium compared to first quarter last year. Survivorship premium has declined (compared to the same quarter prior year) in 9 of the last 10 quarters.

“It is unlikely that survivorship sales will stabilize until the estate tax issue is resolved,” Tumicki said. While overall survivorship sales continued to decline, there has been a shift in product mix. Survivorship UL now accounts for more than half of new premium, compared to a little more than a third in the first quarter of 2002.

LIMRA Contact: Howard S. Drescher, 860-285-7875, [email protected]

LIMRA International is a worldwide association providing research, consulting, and other services to nearly 850 insurance and financial services companies in more than 60 countries. LIMRA was established in 1916 to help its member companies maximize their marketing effectiveness.

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