1. State of the U.S. Life Insurance Industry
Robert Gomez
March 1, 2012

2. Question
What 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. Answer
The first life insurance company in the U.S.
Established 1759

4. Today’s Discussion Industry Outlook Life Insurance Trends
Annuity Market
On the Horizon

5. Industry Outlook Strengths
Capitalization restored to pre-crisis levels
Liquidity position significantly improved
Credit losses on corporate bond portfolios declining
Stronger enterprise risk management

6. Industry Outlook Weaknesses Persistent low interest rate environment
Eurozone contagion risk
Fragile global economic recovery
Potential further downgrade of U.S. credit rating
Overall Outlook for 2012 = Stable (unchanged from 2011)

7. Industry Outlook Qualities of Top Insurers Strong brand name
Broad & varied distribution channels
Product diversity
Top quality service
Advanced technology
Pricing power

8. Question
Which life insurer held the most assets at year-end 2010?

9. Answer
Met Life
How much?
$290 billion

10. Market Outlook
Uncertainties
Investments
Interest Rates
Distribution

11. U.S. Individual Life Sales Trends

12. Term Life Insurance Most popular product From insurer’s perspective:
Competitive market
Little flexibility in premium changes
Sensitive to mortality

13. Whole Life High level premiums, not flexible for policyholder
From insurer’s perspective:
Mutual company uses dividends to reflect experience
Profits affected by mortality, interest, expenses, and persistency
Resurgence in popularity

14. Universal Life Flexible premiums Unbundled product
Secondary Guarantees
Specified Premium
Shadow Accounts
Concern over profitability & level of reserves

15. Variable Universal Life
Sales followed stock market
Peaked in 2000
Equity-Indexed UL

16. Variable Market Share

17. U.S. Individual Life Annualized Premium Market Share
Source: LIMRA’s U.S. Individual Life Insurance Sales Trends,

18. US Life Insurance Ownership (Percent of Households)
Source: LIMRA Household Trends in U.S. Life Insurance Ownership

19. Life Insurance Ownership Amount of Life Insurance

20. Annuity Market Variable or Fixed Deferred and Immediate
Tax-qualified and Non Tax-Qualified
Longevity

21. Annuity Sales ($billion)

22. Annuity Sales % Change
Source: LIMRA U.S. Individual Annuity Yearbook & U.S. Individual Annuities

23. Variable Annuities Sales following stock market trends
Guarantees on account value
Guaranteed minimum death benefit
Guaranteed living benefits
Accumulation
Withdrawal
Income
From insurer’s perspective:
Risk management and hedging
Asymmetrical risk
Revenues derived from % assets
When stocks decline, so do revenues collected

24. Fixed Annuities – Deferred
Guaranteed interest rates
Book Value Surrenders vs. Market Value Adjustments
Equity Indexed
Growing market
share

25. Fixed Annuities - Immediate
Mitigates post retirement uncertainties
Most popular types have fixed period of guaranteed payments with life contingencies
Difficult purchase for many consumers
Potential for strong growth in the future

26. Question
Which state was the first to forbid gender discrimination in insurance rate-setting?

27. Answer
Montana, in 1985

28. On the Horizon Regulation Principle Based Approach Baby boomers
LTC combination products
Longevity insurance
Pandemic Scenario
Life Settlements
Genetic Testing

29. Robert Gomez ASA, MAAA State Farm Life/Health Actuarial robert. gomez
Robert Gomez ASA, MAAA State Farm Life/Health Actuarial