Overview

Individual Life business remained the most dominant line of business, with office premiums in force of $98,181 million or 85.6% of total office premiums in force. It represented a premium growth of 19.4% from 2004. The number of Individual Life policies attained 6.6 million. Net liabilities of these policies rose by 27.8% to $292,888 million.

The yearly contributions for Retirement Scheme contracts administered by insurers increased by 2.2% to $13,070 million. There were 66,298 Retirement Scheme contracts at the end of 2005 and the net liabilities of these contracts amounted to $106,232 million.

Group Life business decreased slightly by 0.2% to $1,200 million in terms of office premiums in force, whereas the number of policies and net liabilities of the business increased by 5.7% to 15,256 and 4.5% to $527 million respectively.

Annuity and other long term insurance business (mainly comprises Permanent Health business) increased by 5.2% in terms of office premiums in force to $2,305 million. These businesses in aggregate only accounted for 2.0% of the total office premiums of long term insurance business.

Individual Life In-Force Business

Non-Linked business accounted for 68.1% of the total office premiums of Individual Life in-force business, or $66,866 million, representing a 17.1% increase from that of 2004. The number of in-force policies as at the end of 2005 was 5,779,640, up 6.9% from that of 2004. The total sums assured and net liabilities also increased by 5.5% and 27.2% to $2,118,108 million and $205,939 million respectively. Among the Non-Linked products, Whole Life and Endowment insurance took up 84.6% of the total Non-Linked office premiums in force, while Term and Other insurance accounted for the remaining 15.4%. Non-Linked business is classified into with-profits business and without-profits business. Under this classification, with-profits business took up 78.4% of the office premiums in force, while without-profits business accounted for the remaining 21.6%.

Linked business represented 31.9% of the total office premiums of Individual Life in-force business. The business grew by 24.7% in terms of office premiums to reach $31,315 million at the end of 2005. Its number of policies and net liabilities also rose by 25.5% to 807,885 and 29.4% to $86,949 million respectively.

Figure 3.2 Individual Life In-Force Business

Individual Life New Business

Benefiting from economic recovery, the office premiums of Individual Life new business achieved a growth of 21.7% over 2004 to reach $45,351 million in 2005. The number of new Individual Life policies expanded mildly by 0.5% from 1,007,313 in 2004 to 1,012,488 in 2005. This indicated that the premiums per policy had increased on the average.

For new Non-Linked business, the number of policies decreased by 3.7% to 799,057 whereas the office premiums increased by 25.0% to $23,879 million. Compared with regular premium business, single premium business registered higher sales growth both in terms of number of policies and office premiums. As regards different product categories, Whole Life and Endowment insurance business remained the dominant types of Non-Linked insurance product sold, taking up 90.3% of total new Non-Linked premiums, whereas Term and Other insurance accounted for the balance of 9.7%. When Non-Linked business is classified into with-profits and without-profits business, the former took up 82.2% of the new office premiums while the latter represented the remaining 17.8%.

New Linked business in 2005 recorded an increase of 20.1% in number of policies, and it registered a growth of 18.3% in new office premiums. The number of policies and office premiums of new single premium Linked business grew by 38.4% and 17.6% respectively. Sales of new regular premium Linked business also increased by 14.4% and 21.0% in terms of number of policies and office premiums respectively.

New Business Index, defined as total office premiums for all regular premium products plus one-tenth of single premiums, rose by 11.1% in 2005. The increase in New Business Index was the combined result of the new premiums recorded for regular premium business and single premium business, which rose by 7.7% and 29.0% respectively. During the year, the New Business Indexes for Non-Linked and Linked business grew by 6.6% and 20.0% respectively.

Figure 3.3 Individual Life New Business

Individual Life Voluntary Termination Rate (Lapses and Surrenders)

Voluntary termination rate is the ratio of the number of policies lapsed or surrendered during the year to the average number of policies in force and is a measure of the persistency of business.

For Non-Linked Individual Life business, the overall voluntary termination rate decreased to 7.5% in 2005. The rates for the two main types of insurance, i.e. Whole Life and Endowment businesses, were 5.6% and 3.3% respectively.

For Linked Individual Life business, the overall voluntary termination rate also decreased to 6.8% in 2005. Among others, the voluntary termination rate for Whole Life business was 7.7% and that for Endowment business was 4.1%.

Figure 3.5 Individual Life Voluntary Termination Rate

Group Life Business

Group Life business comprises Class A business (non-employer group business) and Class I business (employer group business).

Class A business accounted for 14.9% of the Group Life office premiums. At the end of 2005, there were 1,121 Class A policies in force, covering 332,668 lives and offering a total of $74,669 million in form of insurance protection (i.e. total sums assured). The office premiums and the net liabilities for Class A policies were $179 million and $172 million respectively.

Class I business made up the remaining portion, or 85.1%, of the Group Life office premiums. At the end of 2005, the number of Class I policies in force was 14,135, covering 773,006 lives. The total sums assured, office premiums and net liabilities for this type of policies were $356,160 million, $1,021 million and $355 million respectively.

Figure 3.6 Group Life In-Force Business

Retirement Scheme Business

Retirement Scheme business covers Class G business which provides for a guaranteed capital or return and Class H business which does not provide for such a guarantee.

At the end of 2005, Class G contributions amounted to $7,682 million, representing 58.8% of the overall contributions for Retirement Scheme business. Net liabilities amounted to $64,599 million, representing 60.8% of the total net liabilities. Net liabilities can be classified into unit and non-unit liabilities. Unit liabilities took up 73.7% of the total net liabilities, or $47,632 million, while non-unit liabilities took up the remaining 26.3% or $16,967 million.

Class H business accounted for the remaining 41.2% of the contributions and 39.2% of the net liabilities for Retirement Scheme business. Unit liabilities accounted for 69.7% of the net liabilities or $29,035 million while non-unit liabilities accounted for the remaining 30.3% or $12,598 million.

Figure 3.7 Retirement Scheme In-Force Business

Annuity and Other Business

Annuity in-force business decreased slightly by 1.7% in terms of number of policies, whereas office premiums and net liabilities increased by 2.5% to $1,235 million and 22.0% to $3,635 million respectively. During the year, a total of 5,508 new Annuities policies were sold, bringing office premiums of $409 million.

Other business comprises Permanent Health, Tontines and Capital Redemption business. During the year, Permanent Health business decreased by 2.4% in terms of number of policies to 213,800. Its office premiums and net liabilities grew by 8.6% to $1,070 million and 20.5% to $1,928 million respectively. As regards Tontines and Capital Redemption businesses, they represented total office premiums of about $0.1 million.

Market Analysis

At the end of 2005, there were 65 authorised long term insurers. Excluding Lloyd's and 6 pure reinsurers, 3 insurers reported office premiums in force of over $10 billion. They took up 39.5%, in aggregate, of the long term insurance market. 21 insurers' office premiums were each in the region of $1 billion to $10 billion, covering 54.7% in aggregate of the total figure. 10 insurers reported office premiums in the region of $100 million to $1 billion, accounting for, in aggregate, a market share of 5.5%. 24 insurers with office premiums of less than $100 million represented the remaining 0.3% of the total market.

Figure 3.8 Grouping of Long Term Business Insurers According to the Level of Office Premiums of In-Force Business in 2005

In terms of market concentration of in-force business, the top 10 long term business insurers in 2005 underwrote an aggregate of 72.5% of the total business, compared to 72.6% in 2004.

Figure 3.10 Market Share of Long Term Business Insurers by Office Premiums of In-Force Business in 2005

In terms of Individual Life new business, out of the total 37 insurers underwriting such business in 2005, 13 insurers reported new office premiums in excess of $1 billion. These insurers accounted for a market share of 81.4% of the total business. 17 insurers with new office premiums in the range between $100 million and $1 billion accounted for 18.4% in aggregate of the total market. The remaining 7 insurers with new office premiums less than $100 million represented 0.2% of the total figure.

Figure 3.11 Grouping of Long Term Business Insurers According to the Level of Office Premiums of Individual Life New Business in 2005

Market Performance for the First Three Quarters of 2006

For the first three quarters of 2006, the provisional statistics showed that the long term insurance industry grew by 18.5% in terms of total revenue premiums to $97,616 million when comparing with the corresponding period of 2005. Among the major classes of business, Non-Linked Individual Life and Annuity business grew by 6.4% to $50,211 million; Linked Individual Life and Annuity business expanded by 47.4% to $31,345 million; and Retirement Scheme business also increased by 16.6% to $14,097 million.

New business statistics for the first three quarters of 2006 showed that new office premiums (excluding Retirement Scheme business) of long term business increased by 20.8% to $38,400 million when comparing with the same period of 2005. Individual Life and Annuity (Non-Linked) business decreased by 9.9% to $15,020 million in terms of new office premiums. New office premiums of Individual Life and Annuity (Linked) business grew by 55.4% to $23,109 million.