Operations Expense Surveys Show Rapidly Rising Expenses and Lower Efficiency at Medium Sized...

Business Editors

CRESSKILL, N.J.--(BUSINESS WIRE)--Nov. 14, 2003

TCi Consulting & Research announces the results of its operations surveys at life and annuity insurance carriers. Among the key findings are that total processing expenses per policy or per contract are rising

faster at medium sized carriers than at larger carriers. In addition, the efficiency of these carriers is considerably lower than that of the larger carriers. Each survey also identified a "Best Performing" company based on efficiency metrics and compared that company's results to that of the other participants.

The two operations studies (life and annuity) contain numerous insights on the operating efficiencies, practices and expenses of leading insurance carriers. These surveys have been conducted annually by TCi since 1996.

Key Findings:

Annuity Survey (ACES)

-- Total Processing Expense (TPE) per Inforce Contract is 19.9%

higher for the mid-sized companies and it is increasing at an

average of 5.9% each year. The percentage of TPE spent on NB &

CS Infrastructure is significantly less and the amount for CS

IT Maintenance is more, 16.1% of TPE compared to 7.8% for the

large companies.

-- The Best Performing Company in the ACES survey has a Total

Processing Expense of $49.99 per contract per year vs. the

survey average of over $82.51 per contract.

-- Total IT Expense is growing at a faster rate for the mid-sized

companies, an average of 11.2% increase each year compared to

1.4% increase for the large companies.

-- New Business (NB) Operations Expense per Contract Written is

36.3% more for the mid-sized companies than the average of the

large companies.

-- Customer Service (CS) Processing Expense per Inforce Contract

is 19% higher for the mid-sized companies than the

corresponding unit costs for the larger companies.

Life Insurance Survey (LIONS)

-- Total Processing Expense (TPE) per Inforce Policy is 59%

higher for the mid-sized companies primarily because of the

greater operations cost per policy of $43.59 for the mid-sized

companies compared to $19.39 for the large companies. The

percentage of TPE spent on Operations Expense is 77.7% for the

mid-sized companies and 54.8% for the large companies.

-- The Best Performing Company in the LIONS survey has a Total

Processing Expense of $23.95 per policy per year vs. the

survey average of $45.54 per policy.

-- Total IT Expense is decreasing for both the mid-sized and

large companies but at different rates, an average decrease of

3.5% for the large companies and 10.6% for the mid-sized.

-- New Business Processing Expense per Application Written is

almost the same in both groups, $448.14 for the mid-sized

companies vs. $449.25 for the large companies.

-- Customer Service Processing Expense per Inforce Policy is

23.5% higher for the mid-sized companies due to a larger CS

Operations Expense, $19.78 per policy for the mid-sized

companies vs. $10.19 for the large companies.

2004 Survey Cycle Being Initiated

TCi launches the ninth year of benchmarking life and annuity operations and associated IT with kick-off meetings hosted at New York Life in New York City, on December 2 - 4, 2003. The meetings are for annuity operations (ACES) on Tuesday, December 2; life operations (LIONS) on Wednesday, December 3; and life or annuity IT expenses (LIITES) on Thursday, December 4.

Participants and interested companies attend the no-obligation, one-day meetings to review the content of the 2004 questionnaire and the proposed results. The meeting is a forum for companies to reach agreement on the important metrics needed for measuring their organizations in 2004.

Final results are delivered to participants in early third quarter, including a presentation highlighting participant's overall results compared to others (CORE Report), along with hundreds of detailed data tables for quantitative analysis. The cost of participating in the 2004 surveys ranges from $6,500 to $13,000 per survey, depending on the survey as well as premium income or individual annuity deposits.

Jack Tyniec, Managing Director of TCi, said, "Our Direct Competitor Benchmarking(SM) process is unique in the industry. The results we deliver to our clients are detailed and highly credible. In addition, the insights that TCi delivers to participants in our custom CORE reports provide outstanding value and can be used confidently for business decision making."

Companies involved in the 2003 surveys include AEGON Financial Services Group, AIG SunAmerica, Allstate Financial, AXA Financial, American Express Financial, Ameritas Acacia Cos., Baltimore Life, Fidelity Investments, Hartford, John Hancock Life, Legacy Marketing Group, Lincoln National, MassMutual, MetLife, MONY Group, New York Life, Northwestern Mutual, Prudential Financial, Sun Life Financial and Security Benefit Group.

Report Availability

Formal Reports for 2003 studies will be available to participants near year-end. Reports contain an executive summary and multi-year trend graphs, in addition to between 245 and 360 detailed data tables. Pricing for non-participants per report is $2,995, or $8,500 per set. A 50 percent discount is offered to insurance companies not participating in the studies.

About TCi Consulting & Research

TCi Consulting & Research helps insurance companies find the best way to support their products so that they can provide superior customer service to policyholders and distributors, measure, control and lower ongoing operating expenses and get new products to market quickly.

TCi's Research Division has been conducting its annual Direct Competitor Benchmarking(SM) surveys of operations and IT expenses at life and annuity carriers since 1996. An operations and IT survey for personal lines P&C carriers was initiated in 2002.

TCi's unique combination of insurance knowledge, technology expertise and its ability to offer unbiased advice and assistance is widely recognized and respected within the industry. Since its founding in 1989 TCi has used TCi Tested(SM) Processes and Tools to help over 50 life insurance and annuity clients, including 10 of the top 20 companies in the industry.