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Policyholder dividends: set to rise?

THE DOWNWARD TREND OF dividends paid to policyholders in the last few years may be about to reverse as interest rates continue to creep upward.

Total dividends paid to policyholders for the top 50 companies dropped 5% in 2003 over 2002 after a 2% decline in 2001, according to data from the NAIC annual statement database as compiled by National Underwriter Insurance Data Services/Highline Data.

Dividends from ordinary life insurance policies declined 3% in 2003 over 2002, but increased 8% in 2002 over 2001, the data says. Changes in dividends paid from ordinary annuities were even more pronounced, according to the data. In 2003, there was an 11% drop in ordinary individual annuity dividends over 2002. This followed a 2% increase in 2002 over 2001.

The principal driver of these declines has been the decline in interest rates over the last 4-5 years, according to Paul Graham, vice president and chief actuary with the American Council of Life Insurers, Washington. Dividends are a return of excess money earned on contracts, and part of that excess is generated by interest accrued on contracts, he explains.

Another possible factor, Graham continues, is that there are fewer mutual insurance companies and consequently, fewer participating policies in which contract holders participate in the gains an insurer has experienced. Generally, dividends increase with duration, but there will be fewer of these policies being sold over time, he adds.

The 8% uptick in dividends paid to individual life policyholders in 2002 and the 2% increase in dividends paid to individual annuity contracts could be a reflection of a jump in interest rates in 2001, he says. The larger 11% decline in 2003 over 2002 for individual annuities could reflect annuities' greater sensitivity to interest rates, Graham notes. The total value of an annuity is generating interest and therefore reflects current interest rates, he says. Additionally, annuities are tied to short-term interest rates that are prone to bigger changes than long-term rates, he adds.

If interest rates continue to increase in 2005, Graham says there could be a slight increase in policyholder dividends paid in 2006 as companies change crediting to contracts to reflect this rise.

In several instances, total dividends paid out in 2003 were less than the combined totals for ordinary life and ordinary annuities. Companies explained the reasons for the discrepancies, which ranged from rounding off totals, to sales of lines of business such as group life and group accident and health which reduced total dividends paid out, to negative dividends paid out from group life and annuities.

In a number of cases, reinsurance transactions such as one on a closed block of life insurance business completed by Metropolitan Life affected the total dividends paid to policyholders as opposed to individual lines of business.

AmerUs Life Insurance Company said dividends to policyholders were $66.5 million in 2003 and $68.3 million in 2002 and that the variance noted in the table was due to a reinsurance transaction.

American United Life said total policyholder dividends were affected by an outflow from group annuities and a big reinsurance treaty.

Other companies noted that there were non-dividend decisions that resulted in changes to dividends paid out.

Phoenix Life said a slight discrepancy between total dividends paid out in 2003 and ordinary life dividends in that year was a rounding issue. Total dividend numbers also were affected by the sale of group life and group accident and health business lines, a spokesperson said.

Pacific Life said that in 2003, there was a negative dividend from group life and annuity business of $143,610 that affected the total dividend number. A company spokesman also noted that for both individual life and annuity contracts, the majority of policyholders receive interest credits and not dividends.
TOP 50

DIVIDENDS TO POLICYHOLDERS

(Numbers in $000s)

                                                      %
                                     Dividends:    Change    Dividends:
                                       Total        Over       Total
   Company Name                         2003        2002        2002

 1 Teachers Ins. & Ann. Assoc. of
     America                          4,584,048      -10      5,120,378
 2 Northwestern Mutual Life
     Insurance Co.                    3,764,829       -1      3,791,948
 3 Prudential Insurance Co. of
     America                          2,431,224       -6      2,574,919
 4 New York Life Insurance Co.        1,349,380        4      1,292,449
 5 Massachusetts Mutual Life
     Insurance Co.                    1,098,500       -6      1,163,238
 6 State Farm Life Insurance Co.        584,810      -14        680,717
 7 Guardian Life Insurance Co. of
     America                            518,777        1        513,980
 8 Phoenix Life Insurance Co.           401,225        2        391,567
 9 Manufacturers Life Insurance
     Co. U.S.A.                         385,688        1        381,248
10 AXA Equitable Life Ins. Co.          338,428       -4        353,998
11 Principal Life Insurance Co.         303,075       -4        314,213
12 Metropolitan Life Insurance
     Co.                                296,111       42        208,550
13 John Hancock Life Insurance
     Co.                                253,155      -10        280,017
14 MONY Life Insurance Co.              199,493       -1        202,180
15 General American Life
     Insurance Co.                      191,278       -5        201,941
16 U.S. Branch Sunlife Assur. Co.
     of Canada                          149,900      -12        169,659
17 National Life Insurance Co.          128,117        1        127,213
18 Minnesota Life Insurance Co.         122,426       -3        126,243
19 Great West Life & Annuity
     Insurance Co.                       97,814       24         78,851
20 Country Life Insurance Co.            93,499        6         88,175
21 Lincoln National Life
     Insurance Co.                       76,955        8         71,216
22 American General Life
     Insurance Co.                       65,001        5         68,613
23 Western & Southern Life
     Insurance Co.                       61,659      -13         70,645
24 Nationwide Life Ins. Co. of
     America                             59,624      -11         67,141
25 Savings Bank Life Insurance
     Co. of Mass.                        57,881        7         53,949
26 Southern Farm Bureau Life
     Insurance Co.                       53,443        2         52,333
27 Hartford Int'l. Life
     Reassurance Corp.                   52,655       -2         53,634
28 American Family Life Insurance
     Co.                                 46,234       -2         47,109
29 USAA Life Insurance Company           44,269       -8         48,046
30 Penn Mutual Life Insurance Co.        42,406      -13         48,631
31 U.S. Bus. of the Canada Life
     Assurance Co.                       40,868        2         40,241
32 Nationwide Life Insurance Co.         39,156      -10         43,580
33 Ohio National Life Insurance
     Co.                                 30,388        6         32,496
34 Protective Life Insurance Co.         30,140      -16         36,077
35 CUNA Mutual Life Insurance Co.        28,770        6         27,045
36 Farm Bureau Life Insurance Co.        26,856      -15         31,667
37 First Allmerica Finance Life
     Insurance Co.                       23,348       -5         24,650
38 Security Mutual Life Ins Co.
     of N.Y.                             22,770       -8         24,717
39 Lafayette Life Insurance Co.          22,403      -12         25,486
40 Indianapolis Life Insurance
     Co.                                 22,353      -22         28,714
41 Pacific Life Insurance Co.            21,410       -3         22,086
42 Reliastar Life Insurance Co.          20,975       -3         21,550
43 American United Life Insurance
     Co.                                 20,206        0         20,295
44 John Hancock Variable Life
     Ins. Co.                            19,066       26         15,120
45 AmerUs Life Insurance Co.             18,630      -73         68,316
46 State Farm Life & Accident
     Asr. Co.                            18,244      -14         21,112
47 United Farm Family Life
     Insurance Co.                       17,672      -16         20,998
48 Transamerica Occidental Life
     Ins. Co.                            16,243       42         11,443
49 Hartford Life Insurance Co.           16,065      -23         20,775
50 Continental Assurance Co.             15.602      -17         18,867

   SUMMARY                           18,323,069       -5     19,198,036

                                     Dividends:              Dividends:
                                      ordinary        %       ordinary
                                        life       Change       life
                                     insurance      Over     insurance
   Company Name                         2003        2002        2002

 1 Teachers Ins. & Ann. Assoc. of
     America                            210,649        3        205,191
 2 Northwestern Mutual Life
     Insurance Co.                    3,650,321       -1      3,681,240
 3 Prudential Insurance Co. of
     America                          2,257,707       -6      2,391,309
 4 New York Life Insurance Co.        1,298,199        5      1,240,123
 5 Massachusetts Mutual Life
     Insurance Co.                    1,081,894       -6      1,148,068
 6 State Farm Life Insurance Co.        580,025      -13        670,518
 7 Guardian Life Insurance Co. of
     America                            514,587        0        514,407
 8 Phoenix Life Insurance Co.           401,226        2        393,756
 9 Manufacturers Life Insurance
     Co. U.S.A.                         362,267        3        351.743
10 AXA Equitable Life Ins. Co.          336,269       -4        349,284
11 Principal Life Insurance Co.         296,847       -3        304,459
12 Metropolitan Life Insurance
     Co.                              1,420,264       -4      1,473,992
13 John Hancock Life Insurance
     Co.                                185,309      -21        235,377
14 MONY Life Insurance Co.              198,124       -2        201,479
15 General American Life
     Insurance Co.                      191,183       -5        201,881
16 U.S. Branch Sunlife Assur. Co.
     of Canada                          149,620      -11        167,771
17 National Life Insurance Co.          125,772        1        124,308
18 Minnesota Life Insurance Co.         119,982       -3        123,267
19 Great West Life & Annuity
     Insurance Co.                       97,665       24         78,688
20 Country Life Insurance Co.            93,429        6         88,135
21 Lincoln National Life
     Insurance Co.                       76,953        8         71,214
22 American General Life
     Insurance Co.                       63,571        5         67,097
23 Western & Southern Life
     Insurance Co.                       44,172      -13         50,881
24 Nationwide Life Ins. Co. of
     America                             59,503      -11         67,017
25 Savings Bank Life Insurance
     Co. of Mass.                        57,092        8         52,908
26 Southern Farm Bureau Life
     Insurance Co.                       53,442        2         52,331
27 Hartford Int'l. Life
     Reassurance Corp.                   52,655       -2         53,634
28 American Family Life Insurance
     Co.                                 44,635       -3         45,875
29 USAA Life Insurance Company           44,269       -8         48,046
30 Penn Mutual Life Insurance Co.        41,871      -13         48,174
31 U.S. Bus. of the Canada Life
     Assurance Co.                       40,865        2         40,236
32 Nationwide Life Insurance Co.         39,149      -10         43,662
33 Ohio National Life Insurance
     Co.                                 29,647       -8         32,066
34 Protective Life Insurance Co.         30,128      -16         36,062
35 CUNA Mutual Life Insurance Co.        27,921        3         27,035
36 Farm Bureau Life Insurance Co.        24,620      -12         27,892
37 First Allmerica Finance Life
     Insurance Co.                       21,242       -4         22,163
38 Security Mutual Life Ins Co.
     of N.Y.                             22,642       -8         24,646
39 Lafayette Life Insurance Co.          22,210      -13         25,532
40 Indianapolis Life Insurance
     Co.                                 22,349      -22         28,707
41 Pacific Life Insurance Co.            21,546        0         21,494
42 Reliastar Life Insurance Co.          16,792       -5         17,693
43 American United Life Insurance
     Co.                                 24,475        8         22,717
44 John Hancock Variable Life
     Ins. Co.                            19,066       26         15,120
45 AmerUs Life Insurance Co.             18,630      -73         68,306
46 State Farm Life & Accident
     Asr. Co.                            18,052      -13         20,727
47 United Farm Family Life
     Insurance Co.                       17,672      -16         20,998
48 Transamerica Occidental Life
     Ins. Co.                            16,243       42         11,443
49 Hartford Life Insurance Co.           16,065      -23         20,775
50 Continental Assurance Co.             12,880      -20         16,106

   SUMMARY                           14,571,696       -3     15,045,553

                                     Dividends:              Dividends:
                                      ordinary        %       ordinary
                                       indiv.      Change      indiv.
                                     annuities      Over     annuities
   Company Name                         2003        2002        2002

 1 Teachers Ins. & Ann. Assoc. of
     America                          4,107,821       -11     4,617,845
 2 Northwestern Mutual Life
     Insurance Co.                       29,841        -9        32,869
 3 Prudential Insurance Co. of
     America                                 10      -105          -200
 4 New York Life Insurance Co.              864         3           888
 5 Massachusetts Mutual Life
     Insurance Co.                        9,339         4         8,945
 6 State Farm Life Insurance Co.          4,537       -54         9,794
 7 Guardian Life Insurance Co. of
     America                              1,866       -49         3,628
 8 Phoenix Life Insurance Co.                 0      -100           193
 9 Manufacturers Life Insurance
     Co. U.S.A.                             169       -97         6,454
10 AXA Equitable Life Ins. Co.               83       -23           108
11 Principal Life Insurance Co.              44        -8            48
12 Metropolitan Life Insurance
     Co.                                    573        -5           605
13 John Hancock Life Insurance
     Co.                                    109        98            55
14 MONY Life Insurance Co.                  312         4           301
15 General American Life
     Insurance Co.                          -18      -550             4
16 U.S. Branch Sunlife Assur. Co.
     of Canada                               19       138             8
17 National Life Insurance Co.            2,243       -20         2,809
18 Minnesota Life Insurance Co.               0      N.A.             0
19 Great West Life & Annuity
     Insurance Co.                          149        -9           163
20 Country Life Insurance Co.                38        -5            40
21 Lincoln National Life
     Insurance Co.                            0      N.A.             0
22 American General Life
     Insurance Co.                        1,371        -8         1,498
23 Western & Southern Life
     Insurance Co.                           26         0            26
24 Nationwide Life Ins. Co. of
     America                                 12       -33            18
25 Savings Bank Life Insurance
     Co. of Mass.                             3       -57             7
26 Southern Farm Bureau Life
     Insurance Co.                            1         0             1
27 Hartford Int'l. Life
     Reassurance Corp.                        0      N.A.             0
28 American Family Life Insurance
     Co.                                      0      N.A.             0
29 USAA Life Insurance Company                0      N.A.             0
30 Penn Mutual Life Insurance Co.             0      N.A.             0
31 U.S. Bus. of the Canada Life
     Assurance Co.                            3       -25             4
32 Nationwide Life Insurance Co.              7      -109           -82
33 Ohio National Life Insurance
     Co.                                      9        36            14
34 Protective Life Insurance Co.             12        20            15
35 CUNA Mutual Life Insurance Co.           107     1,089             9
36 Farm Bureau Life Insurance Co.         2,145       -42         3,720
37 First Allmerica Finance Life
     Insurance Co.                           10       -23            13
38 Security Mutual Life Ins Co.
     of N.Y.                                  2       -67             6
39 Lafayette Life Insurance Co.              68       -16            81
40 Indianapolis Life Insurance
     Co.                                      4       -43             7
41 Pacific Life Insurance Co.                 8       700             1
42 Reliastar Life Insurance Co.              -1      -120             5
43 American United Life Insurance
     Co.                                      2      N.A.             0
44 John Hancock Variable Life
     Ins. Co.                                 0      N.A.             0
45 AmerUs Life Insurance Co.                  0      -100             4
46 State Farm Life & Accident
     Asr. Co.                               183       -51           372
47 United Farm Family Life
     Insurance Co.                            0      N.A.             0
48 Transamerica Occidental Life
     Ins. Co.                                 0      -100             1
49 Hartford Life Insurance Co.                0      N.A.             0
50 Continental Assurance Co.                  1         0             1

   SUMMARY                            4,161,972       -11     4,690,278

Source: NAIC Annual Statement Database, via National Underwriter
Insurance Data Services/Highline Data
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Title Annotation:Statistical Feature
Author:Connolly, Jim
Publication:National Underwriter Life & Health
Geographic Code:1USA
Date:Feb 14, 2005
Words:2327
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