Global insurance market trends

US life insurance outlook: 2011

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As insurers seek to reach new customers and maintain contacts with existing ones, strong distributor relationships more efficient administration and improved customer service system interfaces are crucial.

Industry highlights

  • A slowly growing economy, persistently low interest rates and looming regulations that stand to be altered during the year challenge the development of competitive portfolio returns.
  • To generate top-line growth and widen profit margins, insurers will need to consider expanding their menu of products, services and distribution channels, while simultaneously reducing costs and improving operational efficiency.

Companies that enhance their capital management, respond to changing regulations first and optimize products and distribution methodologies will be positioned to achieve more profitable traction in 2011.

Driving growth with pared down costs

The US life and annuity insurance industry enters 2011 with a stronger balance sheet, reasonable earnings momentum and slightly rising direct premiums, albeit at the expense of a declining base. Going forward, the industry confronts a climate of broad regulatory and economic uncertainty in the coming year and beyond.

Facing regulatory and economic uncertainty

In this environment, insurers will need to create new products and services and leverage distribution channels to increase top-line growth, while paring costs and unprofitable risks to drive bottom line earnings. The latter requires simplifying the business and product portfolio, improving operational efficiency and squeezing earnings out of a stagnant revenue base, as the slowly growing economy makes it difficult to attract new customers and retain existing ones.

Challenges for life and annuity insurers

Low interest rate conditions compound these problems, challenging life and annuity insurers to generate competitive product returns. Companies that clearly understand these issues and react quickly and prudently in their strategic core businesses will gain a competitive advantage.

Looming regulatory changes such as those posed by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) are still in the process of being interpreted and implemented — not to mention possibly revised. These changes pose strategic and competitive challenges to life and annuity insurers.

Reposition yourself for future earnings

As insurers address these concerns, they must be cautious to preserve their financial strength. Nevertheless, there are opportunities in deploying rebuilt capital to reposition and grow their businesses and improve future earnings.

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