A surge in group life and other accident-and-health premiums driven by the unusual results of two companies mostly offset the impact of a historically challenging third quarter for individual annuity sales.
Direct premiums and considerations for U.S. life and health insurers across all lines of business decreased by less than 1.4% in the third quarter and 0.4% for the first nine months of 2017, according to quarterly statement disclosures compiled as of Nov. 30 and subject to change. S&P Global Market Intelligence previously projected that direct premiums and considerations across business lines would decline by 1.2% for full year 2017, based on the expectation that weakness in fixed and variable annuity sales would serve as a drag on the overall result.
Annuity sales stymied by regulatory uncertainty
Direct ordinary individual annuity considerations fell on a year-over-year basis for a sixth consecutive reporting period in the third quarter, and the 11.7% decline marked the fourth double-digit percentage drop during that stretch.
The LIMRA Secure Retirement Institute blamed the June effectiveness of the U.S. Department of Labor's fiduciary rule for U.S. annuity sales tumbling to a 15-year low during the third quarter. Though the Labor Department recently extended the applicability of the fiduciary rule's best interest contract exemption for an additional 18 months until July 1, 2019, the rule's impartial conduct standards took effect in June.
Survey data compiled by the LIMRA Secure Retirement Institute show third-quarter declines of 15.8% in variable annuity sales, 8.7% in indexed annuity sales and 9.7% in sales of all types of fixed annuities, including indexed products. Across all annuity product types, sales plunged by 12.7% on a year-over-year basis.
Quarterly statutory statements do not differentiate individual annuity considerations by product type, and the data combines first-year premiums, single premiums and renewal business, but the overall third-quarter decline of 11.7% was directionally consistent with the sales statistics shown in the LIMRA survey.
A handful of large annuity writers bucked the broader trend during the third quarter. Forethought Life Insurance Co., the issuing entity for Global Atlantic Financial Group Ltd.-branded retirement products, reported $1.53 billion in ordinary individual annuity considerations, up 41.8% from the year-earlier period. LIMRA Secure Retirement Institute survey data show that Global Atlantic's sales of fixed annuities other than indexed annuities soared by 107.8% to approximately $877 million during the third quarter.
Global Atlantic President, Retirement Paula Nelson said that changes the company made to its distribution philosophy and structure in late 2016 and early 2017 have been gaining traction. She said that each of Global Atlantic's wholesalers represent the company's entire portfolio, which gives them the ability to present advisers with different product options tailored for individual client scenarios. Plus, she said that competitive crediting rates on multiyear guaranteed annuities and fixed index products contributed to Global Atlantic's expansion. And Global Atlantic offers multiyear guaranteed annuities through 50 wholesalers in the broker/dealer and independent agency channels as compared with six during 2016.
The groups led by New York Life Insurance Co. and Nationwide Mutual Insurance Co. showed double-digit percentage growth in ordinary individual annuity considerations, according to quarterly statement data, and fixed annuity sales, based on LIMRA survey data.
Direct group annuity considerations, which are subject to lumpiness on a quarterly basis, declined by 3.7% in the third quarter. Unlike the individual annuity business, which has shown unfavorable comparisons going back to the second quarter of 2016, it marked only the third time in the past 12 quarters that group annuity considerations fell year over year.
The decline was also notable in that it occurred during a quarter in which the LIMRA Secure Retirement Institute survey showed single-premium pension buyout sales climb 7.4% year over year to its highest quarterly level since the closing three months of 2014. The previous two quarterly declines in group annuity considerations occurred in periods in which pension buyout sales plunged by double-digit percentages on a year-over-year basis.
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The group led by Prudential Financial Inc. led the industry in the third quarter of 2016 with group annuity considerations of $5.49 billion, but its volume fell by 42.3% in the third quarter of 2017.
Across both individual and group annuity business, the 5.5% decline in considerations through the first three quarters of 2017 is essentially in line with the 5.6% full-year 2017 retreat that S&P Global Market Intelligence had previously projected.
Zurich drives life premium expansion
In the ordinary life business, New York Life's year-over-year growth of 23.2% in third-quarter direct premiums fueled the industry's expansion of 2.1%. The group life business's 17.4% increase in direct premiums reflected an extraordinary result posted by Zurich American Life Insurance Co., which generated $1.75 billion in volume. Its group life premium volume totaled $1.81 billion in aggregate during the past 15 years entering the third quarter. When normalizing results for Zurich American Life and its U.S. affiliates, the industry's group life premiums would have declined in the third quarter by nearly 1.4%.
Zurich American Life officials attributed the extremely high group life business volume to a $1.74 billion bank-owned life insurance premium deposit from its largest client.
Across all life business, including credit and industrial life, the year-to-date increase in direct premiums of nearly 3.4% is ahead of the S&P Global Market Intelligence full-year projection for an expansion of 2.2%. The growth rate after adjusting for the extraordinary Zurich American Life group life figure would amount to just over 2%.
Accident and health shows growth
The year-over-year comparison in the other accident and health business benefited from an abnormally low value attributed to the third quarter of 2016 by one of the leading market participants.
S&P Global Market Intelligence calculated that UnitedHealthcare Insurance Co.’s other accident and health premiums totaled $1.92 billion in the third quarter of 2017 based on the company’s year-to-date disclosures for the first six and nine months of the year. The same calculation applied to the respective periods in 2016 yielded premiums of a negative $367.9 million for the third quarter of 2016.
All told, industrywide other accident and health premiums increased by 13.3% for the third quarter, but they would have fallen by almost 2.5% when stripping out UnitedHealthcare's results for the past two years. On a year-to-date basis, other accident and health premiums fell by 1%.
S&P Global Market Intelligence projected an increase of 3.9% across all types of accident and health business reported on life statement blanks for full year 2017. The industry's actual year-to-date growth rate of 5.4% was driven by a 9% increase in group accident and health premiums, but the third quarter's rate of expansion in that line of only 0.6% was well short of the double-digit percentage gains achieved in the first two quarters of the year.
On a total-filed basis, direct premiums and considerations declined by 0.7% for the first nine months of 2017 after normalizing the Zurich American Life group life result. The normalized third-quarter rate of decline would be 2.4%.
When adjusting the third-quarter growth rate to normalize the Zurich American Life result and to exclude UnitedHealthcare's results for the third quarters of the past two years, the industry's rate of decline in direct premiums and considerations widens to 3.7% from the less than 1.4% that appears on a total-filed basis.

