Asides

In the United States, Aflac has earned the distinction of being the number one provider of voluntary/worksite insurance at the worksite when measured by annual premium and market share. Aflac is an excellent company, financially sound, more than 70,000 licensed sales associates, a growing Broker Sales segment and the iconic Aflac duck.

Aflac Career Segment

At Aflac, the career segment success hinges upon the number of recruited agents, the number of producing agents and the average productivity per producing agent.

From 2001 through 2017, Aflac recruited over 341,000 career associates and 36,262, brokers. In 2001, Aflac had an average of 13,089 licensed sales associates, who on average, produced business on a weekly basis with an average production of $70,319.

In 2017, Aflac had an average of 8,809 licensed sales associates produce business with an average production of $176,183. The 2017 numbers includes brokers production.

Aflac from 2000 – 2017

• In 2000, the Aflac Duck was born, and Aflac saw growth of 28.3% while the industry increased 19.23%.

• In 2001, new sales increased of 29.07% while the industry saw growth of 12.90%.

• In 2002, new sales increased of 16.4% and hit the $1 billion mark while the industry increased 15.05%.

• In 2003, new sales increased 5.4 % and outpaced the industry which increased 1.81%.

• In 2004, new sales increased 5.1% and the industry increased by 3.00%.

• In 2005, new sales increased 6.16%, and the industry increased 3.4%.

• In 2006, new sales increased 13.3%, and the industry saw a 7.99% increase.

• In 2007, new sales increased to $1,558 billion, a 9.48% increase and the industry had a 4.63% increase. Aflac had a 30.92% market share.

• In 2008, new sales had a slight decrease to 1,551 billion although the industry had an increase of 3.71%.

• Also in 2008, Aflac hired a management team to launch Aflac for Brokers with a launch date of January 1, 2009. This was the beginning of a strong focus on growing broker sales and having two distinct distribution systems. Prior to 2009, broker business was managed by the Aflac independent field force. Broker sales had decreased from $202 million in 2002 to $180 million in 2008 for a CAGR of (-1.90%).

• In 2009, the career segment produced $1,250 billion in new sales while broker sales produced $203 million. Career sales had a decrease of $121  million in 2009.

• In October of 2009, Aflac acquired Continental American Insurance Company located in Columbia, SC which added group products for Aflac.

• In 2010, career agents produced $1,106 billion in new sales while the broker segment increased to $276 million in new sales. Career sales had a decrease of $144 million.

• In 2011, career segment increased new sales to $1,152 billion, and broker sales increased to $325 million.

• In 2012, career segment had a slight decrease down to $1,116 billion, and broker sales increased to $372 million.

• In 2013, career sales had a new sales decrease to $1,068 billion, and broker sales had a decrease down to $356 million.

• In 2014, career sales had its third straight decrease producing 1,003 billion in new sales premium. Broker sales increased new sales to $430 million and was 30% of Aflac’s new sales.

• In 2015, career sales had a slight increase in new sales to $1,012 billion, and broker sales increased to $475 million, 32% of Aflac’s total new sales.

• In 2016, career sales decreased (1.88%) to $993 million in new sales. Broker sales increased to $489 million in new sales.

• In 2017, career sales increased to $1,009, and broker sales increased to $543 million. Broker sales is now 35% of Aflac new sales.

Aflac’s career segment CAGR is (-3.35%) percent since 2008. In that time period, the career segment has recruited more than 193,334 new associates.

Market Share – Industry

Since 2007, the voluntary/worksite industry has had growth of 4.92% CAGR. Aflac U.S. had a (-0.04%) CAGR in the same time period.

In 2007, Aflac enjoyed a 30.9 percent market share in a $4.7 billion industry. Today, Aflac’s market share has decreased to 19.6 percent while the industry has increased to $8.1 billion in new sales.

MetLife, who is ranked 2nd behind Aflac has increased its new sales from $247 million in 2007 to $1,129 billion in new sales in 2017 and a 14% market share.

While it’s very clear that the Aflac career segment has had their struggles, even with such, its worth noting that if the career distribution was a separate company, their career distribution would have had the largest market share in the industry each year until 2017. In 2017, the career segment would have had a 12.39% market share.

Aflac for Brokers Segment

In October of 2009, Aflac acquired Continental American Insurance Company. CAIC, now known as Aflac Group was a very small company in the voluntary/worksite industry with a 1% market share in 2009.

Aflac’s acquisition of CAIC was a very strategic one, and it allowed Aflac to expand its product line. The addition of CAIC group products allowed   the sales associates and brokers to compete in the group space. Along with the acquisition, a national distribution of over 800 brokers came with it. CAIC, while small, had strategic relationships that the Aflac field distribution had not been successful in developing in past years.

Since the launch of Aflac for Brokers, Aflac has contracted 36,232 brokers and broker sales has increased new sales premium from $180 million in 2008 to $543 million in 2017. Brokers sales CAGR is 13.05% in that time period.

If Aflac’s Broker segment was a separate company, they would have the fourth largest market share at 6.6% and only trail MetLife at 13.9%, Aflac career  at 12.39%, (assuming the career segment was a separate company) and Unum at 6.9%.

Persistency

Many insurance companies are faced with persistency challenges, so this is an ongoing challenge in the industry. Takeover business is about 58% of new sales in the industry, up from 12% in 2006.

That being said, Aflac’s lower persistency has cost them more than one hundred million in profits based on their last twelve years. In that time period, persistency has been between 72.2% – 77.5%.

There are many underlying factors that contributes to low persistency. With most major group insurance companies going down to 5 lives, that puts Aflac’s individual products at high risk for replacement. The same could be said about Colonial and other carriers who over the years have sold individual products before moving to group platforms. For instance;

Colonial’s persistency the last seven years has been from a low of 73.8% – 75.7% for their accident, sickness, and disability products.

Colonial’s persistency for their cancer and critical plans have been between 81.2% – 85.7% in the same time period.

Unum’s persistency the last seven years has been from a low of 75.9% – 80.5% for their voluntary benefits products.

Unum’s persistency for group life in the same time period has been from 88.0% – 90.8%.

Unum’s group disability has been between 87.2% – 92.1% and their group short-term disability between 86.6% – 89.9%.

MetLife has about $10 billion of inforce premium, and Aflac’s last annual statement shows $6,052 billion inforce. They are about 38% of the inforce premium in the industry. A one percent move in persistency is a big number.

One final stat – in a typical year, it takes the first ten months of Aflac’s new sales premium to offset its annual lapses. From 2006 -2017, in-force premium has increased from $4.1 billion in 2006 to $6.0 billion in 2017. In that same time period, Aflac has written $17.427 billion of new sales premium.

Outlook for Aflac

I believe that Aflac will get it right on the career side, but they have a road with many bumps and curves along the way for them to regain the success they once had. Broker sales will continue to grow, and I believe broker sales will hit $600 million in new sales premium in 2018. If so, Aflac has the opportunity to hit a record, $1.6 billion in new sales for the year.

Full disclosure

I am a fan of Aflac, a former officer and a current shareholder. My comments are based on my own knowledge of Aflac from reading the last twenty years of quarterly, annual and 10-K reports.

Critical Illness insurance continues to grow as employers look for ways to offer their employees solutions to help fill the gap with increasing out-of-pocket costs.

Critical Illness and other voluntary benefits are a cost-efficient way to provide additional coverage to employees at a lower group rate than purchasing an individual critical illness plan.

This survey produced some interesting findings about the current state of critical illness products offerings to employers, the distribution methods and a lack of understanding by many agents and brokers on the value of critical illness.

About the survey

The critical illness survey was conducted between January 8, 2018, and February 9, 2018. A total of 511 employers responded representing 5.4 million employees.

Some of the findings are below:

• 57% of employers who responded currently offer critical illness to their employees
• 14% of employers offer critical illness as an employer paid benefit
• The range of employer paid benefit was between $5,000 and $7,500 with 81% offering $5,000
• 11% of employers started offering critical illness in the last 12 months
• 27% of employers started offering critical illness in the last 24 months
• 62% of employers are offering critical illness plans that are more than 36 months old
• 81% of the employers not offering critical illness said their broker or agent didn’t recommend it
• 31% of employers offering critical illness stated they were not happy with their current plan and were actively looking for a new critical illness product

About the author

Jeff Hyman is a recognized and respected insurance executive with a proven track record of developing and leading the execution of business plans and sales strategies that deliver growth and bottom line results. Jeff’s background includes leadership roles at Willis Towers Watson, Aflac, and General Electric.

Jeff Hyman can be reached at jhyman@jeffhyman.net

Since 2001, I have been involved with the Voluntary/Worksite Industry directly or indirectly. Most years, Aflac, Allstate, Colonial Life and Unum have led the industry in annual premium and market share.

I recently reviewed the last 15 years of data that I have compiled in addition to industry data and other data compiled from my years of consulting and my involvement directly with different carriers. This segment of my article will be focused around four leading carriers who have led the industry throughout this time span.

Between 2001 – 2016, the industry had a CAGR of 5.33%. During this time period, Aflac, Allstate, Colonial, and Unum dominated the industry in total premium each year. Below are the CAGR results over the last 15 years; 

1) Unum – 9.95%

2) Allstate – 8.63%

3) Colonial – 4.69%

4) Aflac – 3.24%

Between 2001 – 2006 the CAGR for the Voluntary/Worksite industry was 6.14%. Below are the CAGR results for this time span;

1) Unum – 18.41%

2) Allstate – 18.26%

3) Aflac – 9.85%

4) Colonial – 5.33%

Within this same time span, the industry enjoyed year over year growth of $1,215 b. Aflac represented $551 m of the industry growth within this time period, and Aflac’s market share increased from 26.25% in 2001 to 31.20% in 2006.

Unum, Allstate, Aflac and Colonial’s combined percentage of annual premium grew from 39.9% in 2001 to 49.4% in 2006.

Colonial Life experienced a slight decrease in market share from 6.90% in 2001 to 6.70% in 2006.

Unum’s market share increased from 3.40% in 2001 to 5.90% in 2006.

Allstate increased its market share from 3.30% in 2001 to 5.70% in 2006.

What Has Happen Since 2006?

The industry increased $939 m from 2007 -2011. New carriers jumped into the industry, and major medical carriers started actively offering VB products too and wanted their share of the market. 

Aflac peaked in 2007 with $1,558 b in annual premium although its market share fell slightly to 30.92%. By the end of 2011, Aflac’s market share had fallen to 26.09%, and its annual premium gain was only $6 m for the five-year period with a CAGR of 0.08%.

Unum continued to see yearly success reaching $460 m in 2010 and a 8.77% market share before falling to $387 m in 2011 with a market share of 6.84% and a CAGR of 6.92% for the five-year period.

Allstate continued to grow from 2007 – 2011 and benefitted by winning Walmart from Aflac. This accelerated Allstate’s growth in the large employer market. Their net growth in annual premium over the five-year period was $94 m  with a CAGR of 6.24%.

Colonial saw its market share decrease in 2007, 2008 and 2009 before increasing market share to 6.84% in 2010. This increase was short-lived when its market share fell to 6.47% in 2011. For the five-year period ending in 2011, Colonial’s net premium growth was $51 m with a CAGR of 3.05%.

MetLife, who had been building their VB/Worksite products under the radar was no longer a secret. They grew their annual premium from an estimated $232 m in 2006 to about $300 m in 2011. Met’s market share grew to about 5.30% in 2011 with a CAGR of 5.28%.

Medical carriers Humana, Cigna, and Aetna, had CAGR of 46.51%, 24.18%, and 11.21% respectively.

Sun Life, Lincoln Financial, and Transamerica made their mark in the five-year period with a CAGR of 20.48%, 17.93%, and 15.84% respectively. 

Part two of my article will cover what has happen since 2011.