Japan, in particular, is a boom market for U.S. life insurers, Trefis analysts say. Japan is the second biggest life insurance market in the world after the United States, where more than 20 percent of the world's premiums are originated. While Japan Post Insurance dominates the market, nearly half of the insurers in the country are foreign-owned operating as subsidiaries, including Prudential Financial, MetLife and MassMutual Life.

Penetration of the Japanese market for all life insurers, as measured by the amount of premiums as a percentage of Japan's gross domestic product, is nearly 10 percent—compared to a 4 percent penetration in the United States, according to Trefis analysts. They expect the Japanese market to grow to $533 billion by 2020.

Japan contributes roughly 50 percent of Prudential's earnings and revenues from that country should continue to be strong, Jeffrey Schuman, an analyst at Keefe, Bruyette & Woods Inc. in New York City, said in a July 17 research note.

Scot Hoffman, vice president of global communications at Prudential, says the carrier operates insurance companies in Japan, Korea, Taiwan, Mexico, Argentina, Brazil, Italy and Poland, and has insurance operations in India and China through joint ventures.

“We have a leading position in the Japanese market, which is the second largest market in the world, after the U.S.,” Hoffman says. “We continue to seek opportunities for expansion into high-growth markets in targeted countries.”

Continued growth

Prudential's international insurance segment manufactures and distributes individual life insurance, retirement and related products, including certain health products with fixed benefits, and distributes its products through multiple distribution channels, including two captive agent models, “life planners” and “life consultants,” as well as bank and independent agency third-party distribution channels.

For the second quarter, Prudential's international division continued to grow, Trefis analysts said in August. Net premiums from international operations were up 2 percent from the prior year, on a constant exchange rate basis. Premiums were up 7 percent in Japan. The number of individual policies outside the U.S. increased from 11.8 million at the end of the second quarter of 2012 to 11.9 million at the end of June, 2013. In Japan, the number of policies has increased from 2.7 million to 2.9 million.

“We expect Prudential to continue to grow its international operations in the coming years,” the analysts wrote. “The company is looking to expand in emerging markets, particularly in Asia and Latin America and has established operations in Japan, Taiwan, Italy, Korea, Brazil, Argentina, Poland and Mexico.”

Likewise, MetLife has operations in some of the fastest growing economies in Asia, including China, Japan, Hong Kong, South Korea and Australia, according to Trefis analysis.

For the second quarter, the carrier reported a 2 percent increase in premiums from Asia, driven by a 3 percent increase in sales, primarily in the three of the biggest economies: Japan, India and China. MetLife has a market share of around 5 percent in the Japanese insurance market, with around 7 million policies in force and over $75 billion in assets.

In China, the company has a market share of 10 percent of the foreign-owned life insurance market. The company also has a 10-year exclusive distribution agreement with the largest nationalized bank in India, Punjab National Bank.

MetLife's operating income from Latin America fell 7 percent in the second quarter, over the prior year primarily due to higher expenses related to business expansion and lower investment income, the analyst said. Sales in the region remained strong, increasing 32 percent driven by business growth in Mexico. Premiums from Latin America increased 12 percent, year-on-year.

“We expect the company to continue to expand in emerging markets in Latin America and Asia,” the analysts said.

Steven Schwartz, an analyst at Raymond James in Chicago, said in an Aug. 1 research note that MetLife in the second quarter benefited from companywide excess variable investment income and tax items in Europe, the Middle East and Africa. Those items were offset by higher than expected catastrophes and a value of business acquired write-off related to the pension business in Poland. However, “underwriting in the U.S. was disappointing, reflecting higher than expected mortality in retail life and adverse morbidity in non-medical health.”

In a July 31 research note, Schuman said that MetLife's premiums in Latin America grew 12 percent, or 8 percent constant currency, in the second quarter. For Asia and EMEA, premiums increased 9 percent or 11 percent constant currency, excluding an exited business.

Metlife did not return phone calls or emails for comment.

Still underinsured

Many insurers are expanding in foreign countries to make up for moderate growth in the United States.

According to Eastbridge Consulting Group, overall life insurance sales increased more than 11 percent in 2012.

In fact, while life premiums in the first quarter rose 7 percent over the same time last year, half of U.S. households (58 million) indicated in a 2010 survey that they needed more life insurance coverage, says Todd Silverhart, corporate vice president and director of LIMRA Insurance Research.

According to LIMRA, many U.S. consumers aren't buying life insurance because they have competing financial priorities: They may think they can't afford life insurance because they tend to overestimate the actual cost of insurance coverage, they don't know how much insurance to buy and many simply procrastinate. If the industry could reach such households, total life insurance coverage could be increased by $6.6 trillion dollars, Silverhart says.

Opportunities for U.S. sales also will increase as more carriers and insurance agents offer “pure online options,” more employers place life insurance products on their menu of voluntary benefits, and if the new health care exchanges offer such products, he says.

Markets to watch

While the U.S. middle market may represent the largest opportunity, U.S. “ethnic” markets, particularly the Hispanic market, is increasingly being recognized as a great potential for life insurance sales, Silverhart says. Between 2000 and 2010, the U.S. population increased by 27 million, and the Hispanic population represented more than half of the total growth, increasing by 15 million.

“Over the next 20 years, Hispanics will grow by 36 million—three and a half times more than any other ethnic group,” Silverhart says. “While the numbers suggest a huge opportunity, only those who understand and respect the cultural sensibilities of Hispanic market, as well as other ethnic markets, will have an opportunity to succeed.”

In fact, all of New York Life's U.S. cultural markets are experiencing growth in life insurance sales, and the fastest-growing is the Hispanic market, says Jane Conti, vice president, agency department, New York Life. The carrier doesn't focus on many international sales, but does sell life insurance in Mexico.

“The Hispanic market is experiencing significant growth due to the size of the population and its mounting affluence and influence in the United States,” Conti says. “Business owners make up a large portion of these cultural markets and life insurance can be used to protect businesses and ensure they can be passed from generation to generation, which is often a critical objective.”

In some U.S. cultural markets, like many of the U.S. Asian markets, whole life insurance is attractive based on its ability to provide cash value which from their perspective aligns with their desire to be conservative, protect their families and businesses and save for the future, she says. In these markets, personal savings rates tend to be higher than mainstream.

In its first quarter (fiscal year ending Sept. 30), New York Life's individual recurring premium life insurance sales through agents rose 20 percent, over the first quarter of 2012. The number of life insurance policies sold through agents rose 6 percent, with 45 percent of the company's new life insurance policies produced by agents serving the cultural markets. New York Life's cultural markets include African-American, Chinese, Hispanic, Korean, South Asian and Vietnamese.

In the future, Gen Yers present an emerging opportunity, as the US Census Bureau projects that they will make up 65 percent of the American workforce within the next five years, Conti says.

“Generation Y is also a tremendous opportunity in the various cultural markets where there is a growing number of individuals from these backgrounds who either came here when they were very young, and a number who were born in the United States,” Conti says.

“These individuals still retain many of their cultural traditions, but have adopted many Western traditions,” she says. “Their world is very diverse, and the way we connect with them may be slightly different than their first generation parents.”