Individual life insurance annualized premiums plunged 20% in the second quarter, according to LIMRA’s U.S. Individual Life Insurance Sales report. For the year to date, sales fell by 23%.

In a statement, LIMRA senior analyst Ashley Durham called the drop-off the “steepest six-month decline since the second half of 1942.”

But the one bright spot is that “sales in the second quarter weren’t as bad in the first quarter,” said LIMRA spokeswoman Catherine Theroux.

LIMRA blamed the decline on both the economic malaise and a reduction in sales to seniors, “which tend to be higher face amounts and represented more than half of annualized premium sales in 2008,” the company said in its statement. In a telephone interview, Durham noted that life insurance sales traditionally had not been affected as harshly by past economic slowdowns.

Variable sales, which have the closest link to the market, were hardest hit, freefalling approximately 50% for the second quarter and 55% for the first six months of the year. “We don’t expect variables to come back anytime soon,” Durham said. When other investments bounced back following the 2000 market pullback, “variable products didn’t recover,” she said. Consumers who had to put more money into these products became wary, she said.

Meanwhile, universal life sales dropped 29% for the second quarter of 2009 and 27% for the first half of the year. This is the fourth consecutive quarter of double-digit declines, noted LIMRA.

However, whole life and term life insurance fared much better. The former slid by only 3% in the second quarter and 4% for the first half of the year. Term insurance also dipped a mere 3% for the second quarter and the first half of the year. LIMRA noted that whole life and term both maintained their 28% market share of new premiums issued. “Those companies which had a strong marketing and product line in the whole life and the term area have done better than those that focused on variable and UL products,” Theroux said.

LIMRA noted that “overall, policy count continued to drop in the second quarter, down 4% [and] 6% year-to-date. Every product except universal life, which increased 8%, experienced declines in the second quarter.”

Durham said that LIMRA is forecasting a double-digit decline in sales this year followed by a double-digit recovery in 2010.Variable annuities were hardest hit, freefalling approximately 50% for the second quarter and 55% for the first six months of the year.

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