By Cyril Tuohy
Ingredients that have made life insurance companies successful over the past six years relate to with product mix, consistency, shorter bond maturities and expense control, according to a new report by Conning & Co.
Higher productivity among distributors is also a factor but more so among smaller life insurance carriers, the report also found.
“One overriding characteristic of these successful companies was the consistency in their product mix over time; they appear to have found and kept true to the optimal mix for their firm,” said Terence Martin, an analyst with Conning.
Ever larger policy sizes and capital levels — as long as they are within “reasonable ranges” — did not play much of a role in the companies’ success, Conning said in its “2014 Successful Life-Annuity Specialist Study.”
The most successful life insurers in the small-carrier category were Bankers Life, First Catholic Slovak Union, GBU Financial, Greek Catholic Union, Manhattan Insurance Group, Liberty Bankers Group and Tennessee Farmers, the report said.
Top carriers in the midsize-company category were FBL Financial Group, Indiana Farm Bureau, Modern Woodmen of America, Symetra and USAA.
Successful large-group companies were Great American, Jackson National and Thrivent Financial, the report noted.
Each company considered successful has found an “optimal product mix that works for its specific products, markets and distribution,” the report said. Once the companies found that balance, they rarely wavered from it.
Conning director of research Steve Webersen said the analysis had revealed “a greater focus on annuities among the successful insurers than we had previously.”
“Yet no specific mix of individual life and annuities appears more conducive to success, although stability of that mix does contribute,” Webersen said in a news release.
It’s easier for large insurers to depend on single-premium life and annuity products than it is for smaller carriers since larger carriers can “absorb the corresponding volatility,” that a single-premium product entails, he said.
In a single-premium life insurance policy or annuity, a policyholder pays a lump sum in return for a death benefit. The funds are invested and build up more quickly because the single-premium policy or annuity is fully funded.
By contrast, smaller carriers with narrower product portfolios “are more likely to succeed if they avoid single-premium products,” he also said.
Carriers were classified by size based on a combination of assets, surplus and direct premium, the report said.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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