Life and health insurance revenues were healthy in 2018, Tiburon
Strategic Advisors reports.
Insurers
can expect "moderate growth" in the coming years on both the property
& casualty and life/health sectors, a leading analyst says, but far greater
opportunities exist for certain products.
Specifically,
long-term care insurance and longevity annuities, said Chip Roame, managing
partner of Tiburon Strategic Advisors.
Both
products are desperately needed by baby boomers and near boomers, he said, but
might not be evolved enough to be sold as heavily as they should be. LTC
coverage is making a comeback, Roame noted, but it remains to be seen how much
it sells.
"Some
(insurers) are coming back in, many with bundled products, with long-term care
linked to a life insurance policy," he said during a recent webinar.
"It should be huge growth. As baby boomers are aging, many people need
this product, but it might not be available at the right price."
The
Tiburon webinar focused on the performance and future of insurance products,
which generate about $1.5 trillion of revenues. About $1.2 trillion of that is
premium, while the other $300 billion is interest, dividends and other
investment income for those firms.
From
that, insurers net $88 billion in profits, Roame said. Life and health
insurance represents about 60% of the revenues, while P&C products are
responsible for about 70% of the profit.
More
Predictions
Roame
commented on three additional Tiburon predictions for the future of insurance
products:
·
Potential for federal regulation. With
the present Republican administration, federal encroachment into insurance
regulation doesn't seem likely any time soon, Roame conceded.
"But
periodically we hear that fed regulation is bubbling back up and insurance may
be regulated at the federal level," he added. "So we’ll see, but
that’s always out there."
·
Evolving capital structures.
“You’re
now starting to see some rapid insurance company consolidation," Roame
said. "Unlike banks, brokerage companies and some others, insurance
companies generally buy each other. They buy investment managers and then they
buy and often sell broker-dealers."
·
Opportunities outside the United States.
“With
growing populations and younger populations in Asia and Africa, I think there’s
a lot of upside for insurance companies to think outside the U.S. box,"
Roame said.
Some
Good, Some Bad, Mostly Steady
Overall
2018 insurance profits of $88 billion returned the industry to near 2015
profitability levels. After posting a $92.6 billion profit in 2015, insurance
profits dropped to about $76 billion in 2016 and 2017.
MetLife
remains the king of the insurance world, Roame said, posting $87 billion in
2018 revenues, topping State Farm ($66 billion), Prudential Financial ($48
billion) and Berkshire Hathaway ($44 billion).
As a
share of overall revenue, the property & casualty sector revenues have been
slowly and steadily increasing. P&C products comprised 37% of revenues in
2014, with life/health at 63%.
In
2018, P&C products made up 41% of revenues, with life/health declining to
59%. P&C products had a big 2018, accounting for 67% of net profits in the
insurance product world, up from a 51% share one year earlier.
“We’re
expecting moderate growth in this space," Roame said of P&C products.
"A couple things that are booming – one is cyberinsurance, that’s a big
opportunity. And another is online distribution, or what is known in the
venture capital world as insurtech. There's a lot going on in the online
delivery of insurance."
A
tougher story on the life and health side, where net profits slid to $28
billion, down about 25% from 2017. Health insurance premiums came in at $137
billion, up from $115 billion year over year.
Life
insurance revenues were $905 billion, up from $840 billion in 2017. At $2
trillion, annuity sales are not even close to mutual fund revenues ($17
trillion), Roame explained, adding that "$2 trillion is nothing to sneeze
at."
The
life/health industry continues to face regulatory pressure and change is likely
to come, Roame concluded.
“We
expect moderate grow for the life and health insurance industry," he said.
“I think it’s quite obvious that we‘re going to see some restructuring of
health insurance."
InsuranceNewsNet
Senior Editor John Hilton has covered business and other beats in more than 20
years of daily journalism. John may be reached at john.hilton@innfeedback.com.
Follow him on Twitter @INNJohnH.
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