North American life insurance companies are placing an added emphasis on retirement income products, according to a survey of their chief financial officers, conducted by Towers Watson.
Nearly two-thirds of respondents (64%) said that retirement products have increased as a proportion of their firms’ product mix over the past year, while 50% said they expect the trend to continue over the coming year.
The interest in selling retirement income products has not been dampened by the recent financial crisis, with nearly a quarter of CFOs saying their company’s appetite for this market had been whetted, while nearly two-thirds said it was unchanged.
“While it is a bit surprising that more companies did not report a diminished appetite for these products, it may be due to the fact that the financing requirements are not significant for these products, and the risk is not that great, compared with the term and universal life markets,” said Jack Gibson, leader of Towers Watson’s life insurance consulting practice in the Americas.
The majority of respondents also said they believe that new life and annuity premiums, along with net revenue and net income would increase by at least 4% (quarter-over-quarter) in upcoming earnings reports. More than 60% said they expected new life and annuity premiums would be up on a year-over-year basis.
Just more than half said that second quarter GAAP net revenue would increase over the same quarter last year, compared to 9% who predicted a decline. Further, 73% said GAAP net income would increase compared to the same quarter last year, compared to 18% who predicted a decrease.
“The fact that we’re seeing a continued trend of positive outlooks in life insurance company revenues indicates the industry is regaining its health,” Gibson said. “We are looking for this uptick to continue through the balance of 2010 and into the new year.”
