Recession rocks life insurance sales

U.S. life insurance sales to individuals dropped 20 percent in the second quarter as savers shunned investments linked to stocks, contributing to the biggest six-month decline since 1942, an industry group said yesterday.

For the first half of the year, premium sales fell 23 percent from the 2008 period, trade group LIMRA International said.

Life insurers including Lincoln National Corp., of Philadelphia, and Genworth Financial Inc., of Richmond, Va., have posted losses and profit declines in the last year as investments soured and consumers, pinched by the recession, bought fewer policies and retirement products such as annuities.

Sales of variable life policies, whose value is linked to the performance of stocks or bonds, plummeted 79 percent in the second quarter, according to LIMRA.

"There's less money to go around" as savers invest their assets, said Steven Schwartz, an analyst with Raymond James Financial Inc. "Variable products have been dead before. Historically they've come back as markets come back."

Shares of life insurers have fallen 32 percent in New York trading over the last year, according to the 11-stock Standard & Poor's Supercomposite Life & Health Insurance Index. MetLife Inc., the biggest U.S. life insurer, has slipped 31 percent, and No. 2 Prudential Financial Inc. is down 32 percent. Lincoln has dropped 51 percent, and Genworth has declined 35 percent.

Sales of so-called term life policies, which promise a death benefit if the policyholder does not survive the period outlined in an insurance contract, slipped 3 percent. Term life does not expose the policyholder to the equity-market risk of variable policies.

Lincoln, which secured a government bailout as it recorded three consecutive quarterly net losses, posted a 25 percent drop in life insurance sales in the three months ended June 30. The government aid came from the $700 billion financial-industry rescue that Congress approved last fall.

Sales declined 42 percent in the second quarter at Genworth, which failed to get a U.S. rescue.

MetLife said second-quarter total life first-year premiums and deposits slipped 1.7 percent in the second quarter.

The number of life insurance policies sold declined 4 percent in the second quarter, LIMRA said.