January, 2013

Dear Friends and Clients:

To say that these are challenging times for the life insurance industry would be a shocking understatement. On the negative side of the ledger are low interest rates, market volatility, increased regulation, higher tax rates, and fewer and less loyal producers. On the positive side are only a few elements, like lower mortality and strong capitalization.

One of the other positive outgrowths of this environment has been the industry's increased awareness of managing inforce business liabilities. The life insurance culture has for years been sales-focused, with less attention given to managing inforce to win-win outcomes. Now, we are witnessing carriers offering post-issue settlements on inforce VA guarantee liabilities, restructuring inforce UL charge scales, and developing highly insightful metrics on which inforce business is profitable or unprofitable (by age, risk class, gender, policy, and even producer). Obviously, any changes to inforce policies must be allowable by the terms of the issued contract.

These trends are positive for the industry. The more understanding and thoughtful management action associated with inforce business, the stronger the industry will be. Life carriers who have analyzed the financial profile of their inforce will be able to better target attractive distribution and customer profiles and improve financial results. This will permit the development of more competitive, well-customized new products and modifications to existing products.

Tim Pfeifer
President