Challenges Facing the Life Insurance Industry. William J. Wheeler President, Americas MetLife

Transcription

1 Challenges Facing the Life Insurance Industry William J. Wheeler President, Americas MetLife

2 A Challenging Time for the Life Insurance Industry

3 Lowest Interest Rates in a Generation 10-Year Treasury Percentage Yield Interest Rate % Source: Yahoo Finance 3

4 Low Interest Rate Outlook over Next Several Years "We expect rates to stay at these low levels until Richard Fisher, Dallas Federal Reserve President Source: Reuters, November 29,

5 Significant Regulatory Concerns: Federal We continue to expect that the implementation of non-bank SIFI standards will likely materially increase required capital for the largest insurers. Thomas Gallagher, Credit Suisse Source: Credit Suisse US Life Insurance, October 11,

6 Significant Regulatory Concerns: State There is a need to improve the regulation and transparency of the risks that captives/spvs may pose Source: National Association of Insurance Commissioners - Captives and Special Purpose Vehicles White Paper,

7 Significant Regulatory Concerns: International "...Solvency II is a reality and will have a significant impact on the U.S. insurance industry at large... Source: Solvency II and its Implications for U.S.-based Insurers. Robert Dyer and Dr. Robert Mark 7

8 Declining Agent Count 300,000 Number of Life Insurance Agents 256, , , , Source: LIMRA - Census of U.S. Sales Personnel 8

9 Declining Consumer Interest in Life Insurance 85% US Households Owning Any Life Insurance 80% % of US Households 75% 70% 65% Source: LIMRA - "Household Trends in U.S. Life Insurance Ownership

10 Industry Valuation Reflects All of these Challenges Company Price 1 as a multiple of 2013E EPS Price 1 / Book Value per Share (ex AOCI) GNW x HIG LNC MET PFG PL PRU SYA Prices as of January 4,

11 Consumer Needs Remain Strong

12 Struggle to Get Yield on Safe Investments Product Annual Percentage Yield (APY) Range National Average (APY) Savings Account % % 0.15% Money Market % 1-year CD % % 0.28% 2-year CD % % 0.44% Source: Bankrate.com as of January 3, MMA & Savings 2 Taxable Money Market Mutual Funds 3 1 yr CD, minimum deposit of $25, yr CD, minimum deposit of $25,000 12

13 Marginal Tax Rates Are Going to Rise Pelosi says upcoming fiscal deals should include greater tax increase Nancy Pelosi (D-Cal) Source: FoxNews.com, January 6,

14 Retirees Need Guaranteed Income 52% 47% 16% of Older Boomers are highly concerned about having inadequate retirement income due to fluctuations / volatility in the stock market of Young Boomers feel it is very important to have a fixed income during retirement of all workers are very confident they will have enough money to live comfortably throughout their retirement years Sources: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc Retirement Confidence Survey. Bain Research Survey for MetLife April

15 On Their Own for Obtaining Healthcare Coverage The largest issue America will face in 2013 is health care. And it will only get larger. 83% of those who will be newly eligible for Medicaid in 2014 are unaware of these new insurance options. There will be a transition from employer-based [coverage] to more consumers as purchasers. 78% of those eligible for health exchange tax credits in 2014 who are currently uninsured are unaware of these new insurance options. Sources: Geoff Colvin and Lori Beer quoted in Fortune, January 4, Enroll America quoted in The Atlantic, December 14,

16 Want to Talk to an Agent but It s a Luxury for Many % of Consumers Who Prefer Channel for Life Insurance 8% Mail or phone 11% At work 70% 60% 50% % of Buyers Using Channel by Household Income 64% 17% 40% 30% <$35,000 >$150,000 Face to face Internet 20% 10% 0% Face to face Mail or phone Internet Sources: LIMRA "2012 Insurance Barometer Study ; 2011 Buyer-Nonbuyer Study 16

17 The Future

18 Products Will Need to Be Redesigned To lower / eliminate guarantees because of new capital rules and low interest rates To take advantage of principles-based reserving methods To better meet consumer needs (e.g., healthcare) 18

19 Distribution Will Need to Evolve 100% Share of Auto Insurance Net Written Premium 75% Face-to-Face Writers 50% 84% 75% Direct Response Writers 25% 0% 16% 25% Source: MetLife analysis of A.M. Best data 19

20 Industry Will Need to Be More Consumer Focused Industry Sector Average Net Promoter Score Department / Specialty Stores Online Shopping Grocery / Supermarkets Computer Software Brokerage / Investments Auto Insurance Hotels Airlines Cellular Phone Service Banking Life Insurance Health Insurance 0% 20% 40% 60% Source: Satmetrix 2012 Net Promoter Benchmark Study of U.S. Consumers 20

21 What Is Your Company Doing? Does your management team recognize these challenges? What are they doing about it? Changing the business model Meeting Head On Investing in emerging markets Moving On Hunkering down Hoping It Goes Away The competitive market is difficult now. What will happen if companies don t evolve? 21

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