UL Drags Down 1Q Life Insurance Sales

By Cyril Tuohy InsuranceNewsNet

Overall first quarter individual life insurance sales fell 2 percent compared with the year ago period as fixed universal life sales collapsed, LIMRA reported Monday.

Fixed UL sales plunged 19 percent in the quarter compared to the year-ago period, according to LIMRA’s U.S. Retail Individual Life Insurance Sales Survey.

Low interest rates, principle-based reserving and discontinued products took their toll on fixed UL sales that even surging indexed universal life sales couldn’t overcome.

“Growth continued to be hindered most by fixed UL insurance results,” said Ashley Durham, assistant research director, LIMRA Insurance Research.

Overall UL sales (fixed UL and IUL) in the first quarter fell 3 percent compared to the year-ago period and the number of policies sold also fell, LIMRA said.

UL sales measured by new premium dropped by $80 million in the first quarter over the year-ago period.

Face amounts also fell 16 percent.

Sales of lifetime guarantee UL fell 24 percent, LIMRA also reported.

Lifetime guarantee UL products are more expensive for insurers to honor when interest rates are low because of the guarantees and higher reserving requirements.

UL with lifetime guarantees represented 17 percent of UL sales and 6 percent of life premiums in the first quarter, LIMRA reported.

UL represented 37 percent of all life insurance premium in the quarter.

IUL Continues to Roll

IUL continued to shine with first quarter sales rising 8 percent compared to the year-ago period, LIMRA also reported.

It is the sixth consecutive quarter for IUL growth, LIMRA also said.

People like IUL policies because they offer market-linked performance, which means the potential for higher returns than a fixed product weighted down by low interest rates.

Some insurers have recently entered the IUL market and insurers like IUL because lower reserving requirements make them less costly.

In the first quarter, IUL represented 63 percent of UL premium and 23 percent of all individual life premium, LIMRA said.

In addition, 44 percent of IUL writers and half of the top 10 IUL writers reported positive growth in the first quarter, LIMRA reported.

Last October, Symetra and Ohio National entered the IUL market for the first time.

Sales of variable universal life rose 10 percent in the first quarter compared with the year-ago period.

It is the second consecutive quarter of double-digit VUL sales increases and seven out of the top 10 companies reported VUL growth, LIMRA said.

VUL policy count also rose, by 8 percent over the year-ago quarter.

VUL holds a 6 percent market share of total life sales in the first quarter.

VUL sales are measured separately from UL and IUL.

Whole Life Lags

Whole life sales fell 3 percent compared with the year-ago period and it is the third consecutive quarter of declines for whole life new premium, LIMRA said.

"Whole life being down is somewhat surprising," Durham said. "We're seeing dividends declining at some major writers and that could have an impact."

Some insurers blame low interest rates and recent changes to federal tax law for lagging whole life sales, LIMRA also said.

Whole life policy count fell 1 percent and face amounts fell 3 percent in the quarter, LIMRA reported.

Whole life premium represents 36 percent of the total individual life insurance market.

Term life sales were flat in the first quarter and term life commands an individual life insurance market share of 21 percent, LIMRA said.

Summing up first quarter trends, "It's kind of a continuation of the last quarter," Durham said.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].