Milliman Survey Examines Drop in Profitability for Universal Life Insurers

SEATTLE, May 9, 2011 /PRNewswire/ -- Milliman's fourth annual comprehensive study of Universal Life (UL) and Indexed Universal Life (IUL) issues revealed that only 45% of survey respondents met their profit goals on UL with Secondary Guarantee products in 2009.  This figure dropped to 35% during the first half of 2010.  The primary reason cited for failure to meet profit goals was interest earnings.    

The Milliman study, "Universal Life and Indexed Universal Life Issues," explores issues relative to Universal Life with Secondary Guarantees (ULSG), Cash Accumulation UL, Current Assumption UL, and Indexed UL products.  

The study found that ULSG sales were up 7% in 2009 and the first half of 2010, as a percent of total UL sales.  That shift may be temporary as re-pricing is occurring in this market, driven in part by the low interest rate environment.  IUL sales consistently increased, year over year, since 2007.  In addition to reporting sales information by UL product type, the survey also breaks down sales information by distribution channel, premium type, issue age ranges, gender, and by underwriting class.  

The report also includes information about UL sales with long-term care (LTC) riders.  Sales data is becoming more available on UL/IUL products with LTC riders, as more companies begin to offer and track such products.  Nine survey participants reported total UL/IUL sales with LTC riders by LTC rider type elected. Fifteen of the 29 participants now have or expect to introduce LTC accelerated benefit riders in the next 12 to 24 months. Sales data was also reported by distribution channel, premium type, and by issue age ranges and gender.  This aspect of the survey is expected to grow over time, in step with increased sales of combination UL/LTC products.  

In addition to profitability and sales, the study also includes information relative to product and actuarial issues, such as target surplus, reserves, risk management, underwriting, product design, compensation, pricing, administration, and illustration testing.

A record 29 carriers of Universal Life products participated in this annual survey, which is indicative of the high level of interest in this topic in the marketplace today.  

The 136 page "Universal Life and Indexed Universal Life Issues – Detailed Report" is available for purchase by visiting the Milliman website at http://insight.milliman.com/article.php?cntid=7614 or by calling Gina Ritchie at (312) 499-5605.  Participating companies receive a complimentary copy of the Detailed Report, as well as individual company responses reported on an anonymous basis.

About Milliman

Milliman is among the world's largest independent actuarial and consulting firms.  Founded in 1947 as Milliman & Robertson, the company currently has 54 offices in key locations worldwide.  Milliman employs more than 2,500 people.  The firm has consulting practices in healthcare, employee benefits, property & casualty insurance, life insurance and financial services.  Milliman serves the full spectrum of business, financial, government, union, education and nonprofit organizations.  For further information, visit milliman.com.

SOURCE Milliman