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Katie LenziniFebruary 9, 2011
2/9/2011 1
On the Horizon
QuestionWhat was the significance of the Corporation
for Relief of Poor and Distressed Presbyterian Ministers and of the Poor and Distressed Widows and Children of Presbyterian Ministers?
2/9/2011 2
Answer
2/9/2011 3
Today’s Discussion1. Market Outlook2. Life Insurance Trends3. Annuity Trends4. On the Horizon
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Market OutlookStrengths
Economic climate improved from 2008 Surviving companies stronger
Increased capitalReduced expensesPotential opportunity in middle market
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Market OutlookWeaknesses
Dependency on US, global economiesDiscretionary incomeRiskier and more complicated productsNon-insurance competitors (banks,
telemarketing, internet)
Overall Outlook = Stable (upgraded from Negative Q2 2010)
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Market Outlook Qualities of Top Insurers
Strong brand nameBroad & varied distribution channelProduct diversityTop quality serviceAdvanced technologyPricing power
2/9/2011 7
QuestionWhich life insurer held the most assets at
year-end 2009?
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Answer
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Market OutlookUncertainties
InvestmentsInterest RatesDistribution
2/9/2011 10
QuestionWhere do you go for consumer information?
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U.S. Individual Life Sales Trends
2/9/2011 12Source: LIMRA’s U.S. Individual Life Insurance Sales Trends, 1975-2009
Term Life InsuranceMost popular productFrom insurer’s perspective:
Competitive marketLittle flexibility in premium changesSensitive to mortality
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Whole LifeHigh level premiums, not flexible for
policyholderFrom insurer’s perspective:
Mutual company uses dividends to reflect experience
Profits affected by mortality, interest, expenses, and persistency
Resurgence in popularity
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Universal LifeFlexible premiumsUnbundled productSecondary Guarantees
Specified PremiumShadow AccountsConcern over profitability & level of reserves
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Variable Universal LifeSales followed stock marketPeaked in 2000
Equity-Indexed UL
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Variable Market Share
2/9/2011 Source: LIMRA - The Future of Flexible Premium Products 17
U.S. Individual Life Annualized Premium Market Share
2/9/2011 18Source: LIMRA’s U.S. Individual Life Insurance Sales Trends, 1975-2009
Life Insurance OwnershipPercentage of Households
2/9/2011 19Source: LIMRA Household Trends in U.S. Life Insurance Ownership
Life Insurance OwnershipAmount of Life Insurance
2/9/2011 20Source: LIMRA Household Trends in U.S. Life Insurance Ownership
Annuity TrendsVariable or FixedDeferred and ImmediateTax-qualified available
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Annuity Sales Trends ($bil)
2/9/2011 22Source: LIMRA U.S. Individual Annuity Yearbook & U.S. Individual Annuities
Variable AnnuitiesSales following stock market trendsGuarantees on account value
Guaranteed minimum death benefit Guaranteed living benefits
Accumulation Withdrawal Income
From insurer’s perspective:Risk management and hedgingAsymmetrical riskRevenues derived from % assets
When stocks decline, so do revenues collected
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Fixed Annuities – DeferredGuaranteed interest ratesSpread from fixed account earnings rate
Equity IndexedGrowing market
share
2/9/2011 24Source: LIMRA U.S. Individual Annuity Yearbook & U.S. Individual Annuities
Fixed Annuities - ImmediatePoor salesOpportunity for growthMitigate post retirement uncertainties
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QuestionWhich state was the first to forbid gender
discrimination in insurance rate-setting?
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Answer
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On the HorizonRegulationPrinciple Based ApproachBaby boomers
LTC combination productsLongevity insurance
Pandemic ScenarioLife SettlementsGenetic Testing
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