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22
Although industry weathered crisis well generally, focus now
on capital more than profitability.
Innovation took a backseat over the past few years, but is
returning.
Some carriers interested in acquisitions of blocks, not
carriers.
Impact of European accounting regime on U.S. carriers’ views of
risk.
Single most important driver of future product direction is
interest rate levels.
Other Themes – Speed to Market, Process versus Price, Market Demographics
3
Rates
Profitability
Trend will be higher rates at most cells, as long as interest rates are low and before PBR
Thin profit margins – conceded to be loss leader for many carriers; 6-7% IRRs
Reinsurance
ReserveManageme
nt
Return to roots as mortality smoother, not capital/profit leverage
Term UL approach will be short-lived; limited financing available
Twenty-year Term will still be linchpin
More Simplified Issue
Higher Average Size
44
• Fastest growing life product will continue gathering market share
• New products will feature stronger death benefit guarantees and survivorship versions
• New carriers entering the business, and more to come
• Rainbow/look back versions popular
• Viability enhanced due to verdict on SEC Rule 151A and low interest rates
• Efforts to define illustration standards proceeding, albeit slowly
5
Growth will be moderate,
limited to a small number of
carriers
Annuity/LTC Combos will show
very gradual sales traction, but
long-term prognosis is
strong
True LTC benefits require all
infrastructure and regulatory
elements as ‘True’ LTC
Distribution comfort levels
and views toward LTC will be key hurdle – lack of re-commissions
Resolution of some remaining tax issues will
help success of rider
6
• Still will be dominant UL• Interest rate rising helps (and PBR)• Price trend is higher
No-Lapse UL
• Operating in a gray area• Soft death benefit guarantees• Higher interest rates needed
Current Assumption UL
• Product in transaction• Sales and market players dropping• Indexed UL-type parameters needed.
Variable UL
• Continued domination by mutual carriers• Tough competitor as long as interest
rates low
• Rebound and expansion of market• Disclosure requirements create greater
awareness
• Return of substandard charges, modal loads
• Income stream death benefits• Charitable/College Funding Kickers
77
Whole Life
Life Settlements
Features
8
• Sales follow mid-term rates• Steady drops over last year, recent climb
Importance of IR Environment
• Lower minimum crediting• European carriers re-assess• Interest Index Linkages
The Future
• Bonuses• Fewer CD annuities• Lower comp (spread)• Market Value Adjustments
Reaction Steps
Sales strengthening after 151 death
Low volatilities/low interest rates favor FIAs
Banks warming to FIAs
GLWBs driving market, but underpriced?
99
New indices and approaches to crediting interest
Some carriers to offer registered versions
Average comp tracking lower
Participation rates returning
Recent Events
Future Events
10
• De-risking down to trickle
• ITM-ness dramatically reduced
• Asset Allocation = control device
• Lack of Scale led to departures
• Rating Agency focus
• New designs, fewer asset options
Market Still Led by GLBs and will continue
Recent Events
What’s Next?GLBs on Managed Accounts, FundsReductions in 12 b-1 feesGradual pick-up in A share sales
11
Slow traction, success more likely for higherrated carriers
Key is more comp and liquidity (MVA); untilthen, a few carriers dominate; impaired
SPIAs
Appeal in low rate environment; position as aportion of retirement solution
:
:
:
Deferred Income
Annuities
Single Premium Immediate Annuities
Indexed SPIAs
All forms of income annuities likely to be impacted by new payout annuity mortality statistics.