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If you want to nab an outsize share of life insurance and annuity sales, it’s best to be big. That much is evident in a new report from Conning.
The investment management firm’s 7th annual study, “Individual Life-Annuity Growth and Profit Leaders: Leading for the Long-Term,” shows the industry’s titans garner the lion’s share of premiums paid on new and existing policies, an amount that now tops $265 billion.
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Conning’s report, part of the company’s Strategic Study Series, analyzes carrier performance based on such factors as operating margin, return on average surplus, premium growth, and above average sales (as measured by annualized premium). In 2016, Conning extended the measurement period to 9 years from 5 years in prior editions.
Mergers and acquisitions among carriers during the past decade boosted the market share of the 25 largest companies to 72 percent in 2015 from 65 percent in 2006, the report notes. The market concentration among the industry’s behemoths is even greater in individual product lines.
That’s because of insurers’ heightened focus on particular product lines. Over the 9-year period studied, the 25 largest individual annuities carriers increased their share of the annuity pie to 82 percent from 73 percent.
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As measured in direct life and annuity premiums, market share by carrier size, according to A.M. Best data cited by Conning, breaks down as follows:
59.4 percent: non-leading large insurers
24.1 percent: leading large insurers
11.7 percent: non-leading mid-size insurers
3.1 percent: non-leading small insurers
1.2 percent: leading mid-size insurers
0.5 percent: leading small insurer.
Related: Individual life insurance premium up slightly for first half of 2016
Despite industry consolidation, small and mid-size carriers remain firmly entrenched in the market, and some have strengthened their position. (Thinkstock)
Minnows thriving among the big fish
Despite industry consolidation, small and mid-size carriers remain firmly entrenched in the market, and some have strengthened their position.
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“Some smaller life insurance companies not only survived the financial crisis, but also thrived,” the report states. “Some mid-sized companies took advantage of opportunities to acquire struggling competitors and increased their market share.”
The main products of small insurers, the report observes, are fixed annuities. For mid-size and large carriers, fixed indexed annuities and variable annuities are the principal focus.
Differences among the carriers are less pronounced in respect to life products. Term life insurance generally garners between 10 and 20 percent of premium dollars irrespective of carriers size. Like variable annuities, variable universal life is “almost exclusively” the domain of large insurers.
Among the report’s other findings:
Life insurers now hold risk-based capital — the amount in reserve to support business operations given a carrier’s size and risk profile — of between 500 and 600 percent.
Leading insurers outperform industry peers in keeping general expenses low relative to premiums earned.
Small insurers tend to invest more in bonds than larger competitors, as carriers direct more funds to other asset classes as they grow in size. Leading small and mid-size insurers also are more invested bonds that other carriers in their size categories.
Related:
Indexed annuity sales set records in 4th quarter and year
Top 10 annuity providers: Q2 2016
Middle market households own majority of permanent life insurance
LIMRA: Life insurance coverage gap substantial and growing
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Big and getting bigger: Top life insurers boost market share
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