Presentation on theme: "State of the U.S. Life Insurance Industry"— Presentation transcript:
1 State of the U.S. Life Insurance Industry Robert GomezMarch 1, 2012
2 QuestionWhat was the significance of the Corporation for Relief of Poor and Distressed Presbyterian Ministers and of the Poor and Distressed Widows and Children of Presbyterian Ministers?
3 AnswerThe first life insurance company in the U.S.Established 1759
4 Today’s Discussion Industry Outlook Life Insurance Trends Annuity MarketOn the Horizon
5 Industry Outlook Strengths Capitalization restored to pre-crisis levelsLiquidity position significantly improvedCredit losses on corporate bond portfolios decliningStronger enterprise risk management
6 Industry Outlook Weaknesses Persistent low interest rate environment Eurozone contagion riskFragile global economic recoveryPotential further downgrade of U.S. credit ratingOverall Outlook for 2012 = Stable (unchanged from 2011)
7 Industry Outlook Qualities of Top Insurers Strong brand name Broad & varied distribution channelsProduct diversityTop quality serviceAdvanced technologyPricing power
8 QuestionWhich life insurer held the most assets at year-end 2010?
12 Term Life Insurance Most popular product From insurer’s perspective: Competitive marketLittle flexibility in premium changesSensitive to mortality
13 Whole Life High level premiums, not flexible for policyholder From insurer’s perspective:Mutual company uses dividends to reflect experienceProfits affected by mortality, interest, expenses, and persistencyResurgence in popularity
14 Universal Life Flexible premiums Unbundled product Secondary GuaranteesSpecified PremiumShadow AccountsConcern over profitability & level of reserves
15 Variable Universal Life Sales followed stock marketPeaked in 2000Equity-Indexed UL
22 Annuity Sales % ChangeSource: LIMRA U.S. Individual Annuity Yearbook & U.S. Individual Annuities
23 Variable Annuities Sales following stock market trends Guarantees on account valueGuaranteed minimum death benefitGuaranteed living benefitsAccumulationWithdrawalIncomeFrom insurer’s perspective:Risk management and hedgingAsymmetrical riskRevenues derived from % assetsWhen stocks decline, so do revenues collected
24 Fixed Annuities – Deferred Guaranteed interest ratesBook Value Surrenders vs. Market Value AdjustmentsEquity IndexedGrowing marketshare
25 Fixed Annuities - Immediate Mitigates post retirement uncertaintiesMost popular types have fixed period of guaranteed payments with life contingenciesDifficult purchase for many consumersPotential for strong growth in the future
26 QuestionWhich state was the first to forbid gender discrimination in insurance rate-setting?