As the insurance industry continues to recover from an ailing economy, the focus on life insurers’ overall financial health has been largely a “wait-and-see” one. Unlike property/casualty carriers, whose cash flow is relatively fluid, life insurers’ success is tied largely to superior, sustained financial management.
In particular, small life companies ($10 million to $500 million in premium) are often overlooked by financial analysts. Yet, their performance through the financial crisis indicates that the industry as a whole could learn from this subgroup, notes a new report by
“As many large life insurers faltered in the financial crisis, the majority of small life insurers showed much steadier performance,” said Terence Martin, senior analyst at Conning. “Their relatively conservative product mix, with greater focus on whole life, term life, and fixed annuities was one major reason for their stability. This product focus was matched with a more conservative investment stance, which also served them well.”
The Conning Research study, “Successful Small Life Companies: Steady Through the Storm” analyzes small life insurer performance and specifically those small insurers with the most successful performance.
“This is our third study on successful small life companies, and we looked at characteristics that led to consistent performance across the decade as well as through the financial crisis,” said Stephan Christiansen, director of research at Conning. “Some common traits of the more consistently successful performers included a much higher ratio of life premium to annuity premium, and greater distributor productivity. Investment performance of the successful small insurers slightly trailed the industry prior to the financial crisis, but outperformed through and beyond the crisis.”
