> Life insurers’ 2009 results underscore the need to better analyze and understand their expense base, and to take actions on a more consistent basis, according to a new study by Conning Research & Consulting.

“Life insurer profitability has been squeezed by declining premiums and low investment yields,” said Terence Martin, analyst at Conning Research & Consulting. “Of course, in this environment, expense analysis and control are of paramount importance to senior management. Yet our analysis indicates that those insurers who focus on expense management consistently through up and down markets are the consistent high performers.”

The Conning Research study, “Life Insurance Expenses: Breaking Through the Edge of Efficiency” explores individual life insurance expenses, analyzes how much economies of scale and product mix influence a company’s efficiency, and how much is more directly under the influence of management.

“In analyzing individual life companies, we identified the low-cost companies and reviewed their approach to expense management,” said Stephan Christiansen, director of research at Conning. “Our analysis indicates that scale appears to matter less than management may believe. Instead of trying to grow out of their inefficiencies, insurers that outperform use a rigorous and consistent approach to expense analysis and control to ensure long-term profitability.”
March 17, 2010

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