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Group life weakness drags total life premiums down YOY through Q3

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Group life weakness drags total life premiums down YOY through Q3

A more than 6% decline in group life premiums has pushed total life insurance premiums in the U.S. lower year over year in the first three quarters of 2018.

Through Sept. 30, total life premiums are down 0.2% compared to the same point in 2017. Individual premiums have increased 1.5%, but group life premiums declined by 6.1% during the first nine months of the year.

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The decrease in group life premiums would have been considerably less if Zurich Insurance Group AG's U.S subsidiaries' group life premiums did not fall by nearly 97%. Zurich's decline was due to a one-time item in the third quarter of 2017 that did not recur in 2018. U.S. subsidiary Zurich American Life Insurance Co. reported a large single premium of $1.7 billion from its biggest bank-owned life insurance, or BOLI, client.

Banks generally purchase BOLI as a tax-advantaged group life policy, which they then use to fund employee benefits.

Excluding Zurich's large one-time BOLI premium, the industry's group premiums would still have been lower year over year in 2018, but not by much. On a pro forma basis, the decline would have been just 0.4%.

Total premiums at Manulife Financial Corp.'s John Hancock subsidiaries grew 4.0%, the largest percentage increase among the top U.S. life insurance writers, during the nine months ending Sept. 30. The increase was due to growth within the individual business line as its premiums increased to $3.67 billion from $3.53 billion from the prior-year period.

Northwestern Mutual Life Insurance Co.'s total life premiums increased by 0.7% year over year as it remained the leader in combined individual and group premiums through first nine months of the year. Northwestern Mutual controlled more than 8% of the U.S. life market as of Sept. 30, according to the latest quarterly statutory data.

Year-to-date new annualized life premiums grew by 1% year over year, according to LIMRA's sales survey data. Variable universal life annualized premiums grew the most, but only captures 6% of the overall life market.

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Methodology

Individual life insurance refers to term insurance and all forms of permanent insurance (e.g., universal, variable, variable universal, whole) and is reported as ordinary within NAIC statutory statements. Often offered through the workplace, group life insurance is typically term insurance and allows members of a group to purchase coverage up to a certain level without the need for underwriting.

S&P Global Market Intelligence uses statutory total life premiums to determine market share. Total premium is a preferred indicator of market share as it not only reflects new business but also the persistency of a company's existing business in the form of renewal premiums. Additionally, many policyholder acquisition costs are not recovered within one year. As such, total premium can also be a better indicator of profitability for life insurers, whereas new sales do not necessarily equate with profitability.

S&P Global Market Intelligence provides links to external sites where these offer further, relevant information to our readers. While we ensure that such links are functional at the time of publication, we are not responsible in instances where those links are unavailable later.

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Click here to view a template that shows life companies' market share by line of business.