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Tough Economy Hits Life, Vas And Ltci In 2008

Unless you were selling fixed annuities and whole life insurance, the fourth quarter of 2008 was one to forget. The two products were the only bright spots in an otherwise bleak period, according to LIMRA's final quarterly survey for the year.

New annualized premium for individual life insurance dropped 14 percent in the fourth quarter of 2008, ending the year with an overall 7 percent decline. Annuities fared somewhat better, ending the year up three points.

While sales of variable annuities slumped, fixed annuity sales soared 79 percent in the fourth quarter to end 2008 at a record-setting singleyear figure of $109.4 billion, which kept overall annuity sales growth in positive territory.

LIMRA reported that the fourth quarter marked the single sharpest decline in life premium since the fourth quarter of 1951. The overall decline for the year erased the strong 7 percent gain of the previous year and was the largest one-year decline in LIMRA's records. The last significant annual decline was in 1991, coming off a mild recession, when premium fell 5 percent.

The increase in whole life (WL) premium was a plus, though. Following a third quarter resurgence of 7 percent, whole life sales increased 2 percent in the fourth quarter, ending 2 percent higher for the year.

Universal life (UL) sales fell 23 percent in the fourth quarter. Variable universal life (VUL) products continued to follow market trends, dropping 18 percent in the fourth quarter, finishing the year down 17 percent. Term life premium was down 3 percent for the quarter and 2 percent overall in 2008.

Number of policies sold was down 10 percent in the fourth quarter, and finished the year down 4 percent.

Variable annuities (VA) declined 30 percent in the fourth quarter of 2008 as compared to the fourth quarter of 2007. It's important to note that 2007 was a record year for VA sales. Although 2008 year-end sales for VAs were down 15 percent, they have rebounded from larger deficits. In 2001, VA sales dropped 19 percent yet saw doubledigit growth within two years. In 2008, total VA sales reached $155.6 billion.

Sales increased for all fixed deferred annuity product types in 2008, led by a 135 percent increase in market value adjusted products. Sales of book value products, the largest fixed annuity product type, grew 84 percent. Indexed annuity sales increased 6 percent. Immediate fixed annuity sales, while small in total, increased 23 percent in 2008, fueled by growing numbers of retirees seeking guaranteed lifetime income.

After a promising start in 2008, individual long-term care insurance (LTCi) premium fell 23 percent in the fourth quarter, ending 2008 down 7 percent. 2007 had marked a year of growth in individual LTCi, but the 2008 market reversed that growth, recording sales of about $600 million.

Sales of new policies declined 24 percent in the fourth quarter, resulting in a drop of 9 percent for the year. Total policy count reached almost 277,000 in 2008, comparable to levels of the early 1990s.

Approximately 4.8 million individual LTCi policies were in force at the end of 2008, a 2 percent increase over year-end 2007. Despite the economic pressures facing Americans, individual LTCI lapse rates continue to be low, with only about 4 percent of policies (lives) unaccounted for at year-end.

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