New Business Premiums in Life Industry Dropped by 36% in 1st Half of 2002

Singapore, 08 August 2002

Total new business premiums (weighted*) decreased by 36% to $499 million in the first half of 2002, from $777 million in the same period last year. On a quarter-on-quarter basis, the drop was 8% in Q2 of 2002.

New Business Sales in Absolute Terms

In absolute terms, total premiums amounted $3,264 million, a drop of 47% from $6,203 million in the first half of last year, seen mainly in the 49% decrease in Single Premiums from $6,020 million to $3,060 million. However, Annual and Limited Premiums increased by 11% from $183 million to $204 million.

Non-Linked products increased from 56% to 59% of total premiums, while Linked products correspondingly went down from 44% to 41%, mainly because of the uncertainly in the stock market.

In the first half of the year, 52% (or ($1,573 million) of total Single Premium sales came from the non-CPF sector, a substantial increase of 30 percentage points over the first half of 2001.

In absolute terms, the increase was 18% over the sales in the first half of last year, which had record sales when the CPF rules were first fully liberalised.

The growth in new business sales in Annuities has been good. The increase from $202 million to $305 million was 51%. LIA President Mr Tan Beng Lee said, "We expect this figure to continue to rise, as more people nearing retirement are keen to invest the Minimum Sum in their CPF accounts into annuity products for their retirement years. Even those below 55 years of age are also becoming more aware of the need to provide a means of regular cash income in their retirement years and are beginning to invest in annuity products, among other things. We encourage this type of long term financial planning."

Distribution Channels

Although the bulk of new business continued to come from the tied agency, bancassurance is rapidly gaining a foothold as an important distribution channel in the life insurance industry. On a weighted premium basis, its share grew from 11% a year ago to 24% in the first half of this year.

Increased Professionalism in the Industry

In the first half of 2002, about 18% of the total number of applications were submitted with Full Advice in the Fact Find forms, an increase over the 13% a year ago. Partial of Product Advice acccounted for 77% of the applications, while those where the clients have declined any advice accounted for only 5%. Said Mr Tan, "While we are pleased with this positive development, we still have some way to go if we wish to raise the professionalism of our field force and change their mindset from one of product-pushing to one of needs-based selling and financial planning."

Outlook for the Rest of the Year

Mr Tan said, "The investment market is expected to remain uncertain in the second half of the year. However, with total new business premiums of $3.26 billion in the first half of of this year, I expect that we should be able to hit our estimate of between $6.5 billion and $7 billion for the whole year."

In Summary

New Business Sales

Actual New Business Sales 1st Half 2002 1st Half 2001 Change
Single Premiums $3,060.0 million $6,019.5 million -49%
Annual Premiums $185.1 million $170.7 million 8%
Limited Period Premiums $18.8 million $12.3 million 53%
Total Premium $3,263.9 million $6,202.5 million -47%
Total Premium (Weighted) $499.2 million $777.1 million -36%

*   The weighted new business premium figure is calculated as follows:
    10% SPI + 100% API with adjustment for premium payment terms of less than 10 years.