annuity considerations contributed more than half (51%) (Figure 4.1).

Transcription

1 4INCOME The gross income of life insurance companies comes from two main sources: premiums paid by policyholders and earnings on investments. In 200, total income of all U.S. life insurers increased 0 percent to $863 billion (Table 4.). Insurance premiums and annuity considerations contributed 66 percent of total income. Investment earnings contributed 25 percent. The remainder of gross income came from amortization of interest maintenance reserve, commissions and expense allowance on reinsurance ceded, and miscellaneous income. Under statutory accounting rules, net gain from (insurance) operations is calculated prior to net income. Net gain from operations equals gross income minus operating expenditures, policyholder dividends, and federal income taxes. Capital gains, net of tax, are then added to net gain from operations to calculate (after tax) net income. Premium Income Premium receipts derived from sales of life insurance, health insurance, and annuities increased 9 percent to $57 billion in 200 (Table 4.2). The mix of premiums from life insurance and annuity considerations has changed markedly over time. Prior to 986, premium receipts from life policies were greater than annuity considerations, but starting in 986, annuity premiums have exceeded life insurance premiums (Table 4.0). By 200, life policies accounted for roughly one-fifth of premium receipts (8%), while annuity considerations contributed more than half (5%) (Figure 4.). Premiums for life insurance policies totaled $05 billion in 200, a 6 percent decrease from the previous year (Table 4.2). Individual policy premiums accounted for the largest share at $80 billion, or 76 percent. Most were renewals, representing $48 billion, or 60 percent, of individual premiums (Table 4.3). Group insurance was the second-largest contributor to life insurance premiums at $24 billion, or 23 percent of the total. Again, renewals constituted the largest portion at $23 billion, or 95 percent, of all group premiums. Credit life provided $836 million of all life insurance premiums (Table 4.2). Americans spent 0.7 percent of total disposable (aftertax) personal income on individual life insurance in 200 (Table 4.5). Annuity considerations increased 27 percent in 200 to $294 billion (Table 4.2). Individual annuities provided $90 billion in premium receipts, increasing 47 percent from Of individual annuity considerations, single annuity considerations constitute the largest share of this category at $6 billion, while group considerations counted renewals as the largest contributor with $60 billion (Table 4.4). Individual annuity considerations amounted to.7 percent of disposable personal income in 200 (Table 4.5). Premiums for accident and health insurance increased 4 percent to $73 billion in 200 (Table 4.) with group premiums being the largest portion at $9 billion, up nearly percent from 2009 (Table 4.2). Individual

2 accident and health premiums increased to $8 billion, with the largest share at $34 billion coming from guaranteed renewable contracts (Table 4.6). Investment Income and Rate of Return Net investment income of life insurance companies amounted to $202 billion in 200 (Table 4.7). The largest source of investment income was from bonds at $46 billion, followed by common stock ($25 billion) and mortgage loans ($20 billion). Gross investment income increased 0.6 percent from Investment expenses, taxes, and deductions totaling $ billion were down 2 percent from the previous year. As a way of tracking investment performance, life insurers routinely calculate their net rate of return on invested assets. The net rate of return on invested assets is determined by dividing net investment income by the two-year average of the net invested assets. The gross rate of return on total fixed income assets is calculated by dividing the gross investment income on bonds by the average net investment in bonds. In 200, life insurers net rate of return on total assets was 4.3 percent, down from 4.6 percent a year earlier (Table 4.8). This net rate is an annual average based on aggregates of all U.S. life insurance companies after investment expenses, but before federal income taxes. Excluding separate accounts, the portfolio net rate of return on general account assets was 5.4 percent in 200, up from 5.3 percent in The gross rate of return on fixed-income assets measures the return on bonds, preferred stocks, and mortgages. It does not account for depreciation or investment expenses and excludes equity investments (other than preferred stocks), avoiding the uneven treatment of gains in the numerator and denominator of net rate data. Gross rate data apply to fixed-income assets of both general and separate accounts. The industry s gross rate on total fixed-income assets decreased to 5.7 percent in 200 from 5.9 percent a year earlier. Net Gain from Operations Statutory accounting calculates net gain from (insurance) operations as gross income minus operating expenses, policyholder dividends, and federal income taxes (not including tax on capital gains, since capital gains are not included in gain from operations). Net gain from operations after federal income taxes decreased almost 0 percent in 200 to $47 billion (Table 4.9). Net gains can be calculated separately for each major line of business. Net gains from annuities were $2 billion compared with $27 billion in net gains a year ago. The net gain from life insurance increased percent to $9.8 billion. 36 American Council of Life Insurers

3 Table 4. Income of Life Insurers Millions Average annual percent change / /200 Net premiums and considerations Life insurance premiums $30,66 $24,564 $04, Annuity considerations 306,693 23, , Health insurance premiums 05,69 66,64 72, Total 542, , , Investment income 220,862 2,650 22, Other income 2 47,679 47,468 78, Aggregate total 8,469 78, , Notes: NAIC does not endorse any analysis or conclusions based on use of its data. Codification effective with 200 Annual Statement filings changed the reporting of certain lines of business, particularly deposit-type contracts, as explained in numbered footnotes. Data represent U.S. life insurers and, as of 2003, fraternal benefit societies. Beginning in 200, excludes certain deposit-type funds from income due to codification. Also excludes resources for supplementary contracts without life contingencies and annuities certain, lottery payments, structured settlements, and income payment options. 2 Includes commissions and expense allowance on reinsurance ceded. For , includes amortization of interest maintenance reserve. Table 4.2 Premium Receipts of Life Insurers Millions Average annual percent change / /200 Life insurance premiums Individual $02,493 $98,579 $79, Group 26,25 25,43 24, Credit, Total 30,66 24,564 04, Annuity considerations Individual 43,07 28,853 89, Group 63,622 02,727 03, Total 306,693 23, , Health insurance premiums Individual 29,998 75,404 8, Group 73,974 90,005 90, Credit, Total 05,69 66,64 72, Aggregate total 542, , , Notes: NAIC does not endorse any analysis or conclusions based on use of its data. Codification effective with 200 Annual Statement filings changed the reporting of certain lines of business, particularly deposit-type contracts, as explained in numbered footnotes. Data represent U.S. life insurers and, as of 2003, fraternal benefit societies. Beginning in 200, excludes certain deposit-type funds from income due to codification. Also excludes resources for supplementary contracts without life contingencies and annuities certain, lottery payments, structured settlements, and income payment options. Income 37

4 Figure 4. Figure Distribution 4. of Life Insurers Net Premium Receipts, 2009 Distribution of Life Insurers Net Premium Receipts, 200 Annuity considerations 5% Life insurance premiums 8% Health insurance premiums 30% Source: Source: ACLI ACLI tabulations tabulations of of National National Association Association of of Insurance Insurance Commissioners Commissioners (NAIC) (NAIC) data, data, used used by by permission. permission. Notes: Notes: NAIC NAIC does does not not endorse endorse any any analysis analysis or or conclusions conclusions based based on on use use of of its its data. data. Data Data represent represent U.S. U.S. life life insurers insurers and and fraternal fraternal benefit benefit societies. societies. Table 4.3 Individual and Group Life Insurance Net Premium Receipts, 200 (millions) Percent Percent Percent Individual distribution Group distribution Total distribution First-year $0, $ $0, Single 20, , , Renewal 48, , , Aggregate total 79, , , Notes: NAIC does not endorse any analysis or conclusions based on use of its data. Codification effective with 200 Annual Statement filings changed the reporting of certain lines of business, particularly deposit-type contracts, as explained in numbered footnotes. Credit life premiums on loans of 0 years or less duration are excluded. Data represent U.S. life insurers and fraternal benefit societies. Includes dividend additions, excess premiums beyond planned periodic premiums, and single-premium riders. 38 American Council of Life Insurers

5 Table 4.4 Individual and Group Annuity Considerations, 200 (millions) Percent Percent Percent Individual distribution Group distribution Total distribution First-year $00, $22, $22, Single 2 6, , , Renewal 28, , , Total 89, , , Notes: NAIC does not endorse any analysis or conclusions based on use of its data. Codification effective in 200 Annual Statement filings changed the reporting of certain lines of business, particularly deposit-type contracts, as explained in numbered footnotes. Data represent U.S. life insurers and fraternal benefit societies. Beginning in 200, excludes certain deposit-type funds from income due to codification, and includes supplementary contracts with life contingencies. Also excludes reserves for supplementary contracts without life contingencies and annuities certain, lottery payouts, structured settlements, and income payout options. 2 Includes supplementary contracts with life contingencies for individual annuity considerations. Table 4.5 Individual Life Premiums and Annuity Considerations as Percentage of Disposable Personal Income Percent Individual Life premiums Annuity considerations Total Sources: U.S. Department of Commerce; ACLI tabulations of National Association of Insurance Commissioners (NAIC) data, used by permission. Notes: NAIC does not endorse any analysis or conclusions based on use of its data. Codification effective with 200 Annual Statement filings changed the reporting of certain lines of business, particularly deposit-type contracts, as explained in numbered footnotes. Data represent U.S. life insurers and fraternal benefit societies. Beginning in 200, excludes certain deposit-type funds from income due to codification, and includes supplementary contracts with life contingencies. Also excludes reserves for supplementary contracts without life contingencies and annuities certain, lottery payouts, structured settlements, and income payout options. Table 4.6 Accident and Health Insurance Net Premium Receipts Millions Average annual percent change / /200 Group $73,974 $90,005 $90, Credit, Individual Collectively renewable Noncancelable 5,53 6,787 7, Guaranteed renewable 20,07 33,247 34, Nonrenewable,458 5,64 6, Other accident 708 0,872 2, All other 2,222 8,823 9, Total 29,998 75,404 8, Aggregate total 05,69 66,64 72, Notes: NAIC does not endorse any analysis or conclusions based on use of its data. Premium receipts are net of reinsurance. Data represent U.S. life insurers and, as of 2003, fraternal benefit societies. Income 39

6 Table 4.7 Net Investment Income Millions Average annual percent change / /200 Gross investment income Bonds $0,656 $4,860 $46, Preferred stock, Common stock 60,295 3,25 25, Mortgage loans 8,674 20,700 20, Real estate 6,388 4,200 3, Contract loans 6,969 8,36 8, Cash/Short-term investments 5, Other invested assets 9,897 6,095 7, Derivative instruments , NC NC Other write-ins, Total 220,864 2,650 22, Expenses, taxes, and deductions,624 2,43 0, Net investment income 209,238 99, , Notes: NAIC does not endorse any analysis or conclusions based on use of its data. Data represent U.S. life insurers and, as of 2003, fraternal benefit societies. NC: Not calculated. Table 4.8 Rates of Return on Invested Assets of Life Insurers Percent Net rate Total assets General account only Gross rate Total fixed-income assets Notes: NAIC does not endorse any analysis or conclusions based on use of its data. Data represent U.S. life insurers and, as of 2003, fraternal benefit societies. 40 American Council of Life Insurers

7 Table 4.9 Net Gain From Operations After Federal Income Taxes Millions Average annual percent change / /200 Life insurance Individual $7,949 $7,259 $7, Group,43 2,96 2, Credit Total 9,62 9,68 9, Annuities Individual 3,848 5,607 6,657 NC 6.7 Group 4,277,76 4, Total 8,25 27,323 20,76 NC Accident and health Individual 290 5,057 5, Group 2,0 4,65 5,687 NC 23.2 Credit Total 2,759 9,895 0, Other 2 3,702 5,5 5, Aggregate total 24,97 5,95 46, Notes: NAIC does not endorse any analysis or conclusions based on use of its data. Net gain is calculated after dividends to policyholders and federal income taxes are deducted and before realized capital gains or (losses) are added. Codification effective with 200 Annual Statement filings changed the reporting of certain lines of business, particularly deposit-type contracts, as explained in numbered footnotes. Data represent U.S. life insurers and, as of 2003, fraternal benefit societies. Beginning in 200, excludes certain deposit-type funds from income due to codification, and includes supplementary contracts with life contingencies. Also excludes reserves for supplementary contracts without life contingencies and annuities certain, lottery payouts, structured settlements, and income payout options. 2 Includes lines of business other than life (e.g. workers compensation, aviation insurance, etc.). NC: Not calculated. Income 4

8 Table 4.0 Income of Life Insurers, by Year (millions) Net premium receipts Life Health Total insurance Annuity insurance premium Investment Other Year premiums considerations premiums receipts income income 2 Total income 9 $626 $4 $630 $82 $24 $ , ,374 7, , , , , ,46 0 3, , , ,673, , , ,887, , , ,59,445,070 7, , $,00 8,89 2,075,073, ,903,288 2,355 2,546 2,80,97 6, ,998,34 4,026 7,365 4,304,338 23, ,083 2,260 6,26 24,604 6,778,785 33, ,679 3,72,367 36,767 0,44 2,43 49, ,336 0,65 9,074 58,575 6,488 2,959 78, ,829 22,429 29,366 92,624 33,928 4,336 30, ,27 53,899 4,837 55,863 67,952 0,22 234, ,23 83,72* 44,53 94,078 75,435 2, , ,737 88,677 47,549 22,963 82,875 8,460 34, ,53 03,278 52, ,5 92,042 6, , ,290 4,997 56, ,366 03,965 8, , ,692 29,064 58, ,00,853 26, , ,30 23,590 60, ,79 8,984 28,247 4, ,868 32,645 65, ,058 2,389 23, , ,448 56,445 68,658 39,55 24,205 22, , ,948 53,09 86,84 338,5 25,999 28, , ,766 58,389 90,038 35,93 43,967 32, , ,598 78,46 92,83 378,97 52,700 30,90 56, ,039 97,529 92, ,305 70,73 34,628 60, , ,493 94,88 444,27 76,80 42,3 663, , ,22 00, ,535 86,563 49, , ,66 306,693 05,69 542, ,862 47,679 8, ,34 25,255^ 03,43 479, ,399 4, , , ,296^ 08,703 52,482 80,855 40, , , ,558^ 5,827 5,705 79,744 35, , ,69 276,677^ 25, ,20 86,827 27, , ,26 277,7^ 8, , ,859 34,52 779, , ,727^ 4,98 593,49 239,669 50, , ,66 34,225^ 5, , ,394 74, , ,82 328,35^ 65, , ,23 40,66 940, ,564 23,580^ 66,64 522,308 2,650 47,468 78, , ,622^ 72,77 570,987 22,84 78,74 862,570 Notes: NAIC does not endorse any analysis or conclusions based on use of its data. Codification effective with 200 Annual Statement filings changed the reporting of certain lines of business, particularly deposit-type contracts, as explained in footnotes. Prior to 947, the business of health insurance departments of life insurers was not included in this series. Data represent U.S. life insurers and, as of 2003, fraternal benefit societies. *Unusually large increase due to NAIC-mandated change in reporting method for group annuity considerations. ^Excludes certain deposit-type funds from income due to codification. Includes fraternal benefit societies. Beginning in 2000 represents gross investment income. Prior to 2000, figures are net of investment expenses. 2 Beginning in 975, includes commissions and expense allowance on reinsurance ceded. Beginning in 992, includes amortization of the interest maintenance reserve. 42 American Council of Life Insurers

9 Table 4. Individual Life Insurance Premium Receipts, by Year (millions) Year First-year Single Renewal Total 970 $,869 $,4 $4,033 $7, ,705,505 8,25 22, ,520 2,448 23,88 30, ,927 2,486 27,283 35, ,948 3,232 30,675 39, ,90 4,22 27,93 39, ,794 4,735 26,204 39, ,858 6,94 29,202 47,00 986,524 9,90 30,980 52, ,484 5,60 34,584 62, ,670,893 36,50 58, ,658 8,800 38,76 58,74 990,249 8,26 4,055 60,565 99,398 8,445 43,52 63, ,4 9,389 45,739 66, ,34,447 50,570 75, ,08 8,820 53,53 76, ,08 9,945 56,453 78, ,04 0,799 60,00 82, ,592,999 60,846 87, ,353 5,802 60,396 93, ,784 3,540 63,029 93, ,88 6,565 68,047 02, ,849 9,45 58,432 95, ,934 2,768 68,454 06, ,650 20,463 62,795 97, ,098 23,550 7,207 0, ,680 25,363 69,873, ,578 29,774 69,62 3, ,45 40,29 49,044 03, ,460 34,068 68,87 7, ,395 7,930 68,253 98, ,723 20,749 48,48 79,62 Notes: NAIC does not endorse any analysis or conclusions based on use of its data data include credit life insurance premiums. Beginning with 973, credit life premiums on loans of 0 years or less in duration are excluded. Data represent U.S. life insurers and, as of 2003, fraternal benefit societies. Includes fraternal benefit societies. Includes dividend additions, excess premiums beyond planned periodic premiums, and single-premium riders. Income 43

10 Table 4.2 Individual Annuity Considerations, by Year (millions) Deposit-type Year First-year Single Renewal funds Total 970 $83 $230 $547 $ ,28 2, ,033 2,424 NA 6,296 98,240 6,00 2,950 NA 0, ,863 8,769 3,564 NA 5, ,2 7,842 3,950 NA 4, ,385 8,673 4,648 NA 5, ,390,095 6,406 NA 20, ,683 3,28 8,53 NA 26, ,238 8,578 8,948 NA 33, ,875 28,053 7,856 NA 43, ,597 20,970 6,437 $6,403 49, ,080 22,777 6,992 7,87 53, ,854 2,930 6,732 7,54 5, ,775 2,964 7,378 25,232 6, ,793 23,393 6,53 38,288 76, ,263 22,90 6,448 43,22 80, ,93 22,898 8,725 37,834 77, ,727 9,802 6,46 48,077 84, ,806 22,44 6,78 50,45 90,74 998,092 7,29 7,79 60,047 95, ,599 9,470 6,784 74,767 5, ,050 27,022 7,480 90,099 39,65 200* 5,576 63,078 27,002 NA 4, * 64,73 75,42 28,29 NA 68, * 6,439 75,40 24,855 NA 6, * 60,568 86,383 25,88 NA 72, ,77 78,354 2,907 NA 67, ,923 77,93 27,967 NA 87, ,395 7,268 28,84 NA 92, ,758 94, 25,097 NA 208, ,99 9,33 5,603 NA 28, ,286 6,64 28,496 NA 89,946 Notes: NAIC does not endorse any analysis or conclusions based on use of its data. Codification effective with 200 Annual Statement filings changed the reporting of certain lines of business, particularly deposit-type contracts, as explained in footnotes. Data represent U.S. life insurers and, as of 2003, fraternal benefit societies. NA: Not available. *Certain deposit-type funds are excluded from income under codification, making data after 2000 incomparable. Includes fraternal benefit societies. First included in annual statements for 978 and divided into first-year, single, and renewal annuity considerations through American Council of Life Insurers

11 Table 4.3 Rates of Return on Invested Assets of Life Insurers, by Year (percent) Net rate Gross rate Year Total assets General account only Total fixed income assets NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA Notes: NAIC does not endorse any analysis or conclusions based on use of its data. Before 940, some federal income taxes were deducted from net investment income; beginning with 940, rates are calculated before deducting any federal income taxes. Beginning in 994, rates include amortization of the interest maintenance reserve. Data represent U.S. life insurers and, as of 2003, fraternal benefit societies. Includes fraternal benefit societies. NA: Not available. Income 45

12 46 American Council of Life Insurers