Them's the brakes: VA sales skid

Off 8% in third quarter; MetLife drops to No. 3 behind Pru, Jackson National

Nov 20, 2012 @ 11:11 am

Sales of variable annuities fell the most in 12 quarters as insurers led by MetLife Inc. (MET) scaled back offerings of the equity-linked retirement products under pressure from low interest rates and stock market volatility.

Variable annuity sales declined 8% in the third quarter from a year earlier to $36.6 billion, according to data from industry group Limra. Customers purchased $4.6 billion of the products from New York-based MetLife, dropping it to the No. 3 provider behind Prudential Financial Inc. (PRU) and Prudential Plc (PRU)'s Jackson National, from No. 1 a year earlier.

Insurers are seeking to cut their risks from variable annuities, which can guarantee payouts to retirees even if the value of customers' investments falls. Low interest rates limit the returns companies can earn on clients' funds, while stock market declines push liabilities higher. Hartford Financial Services Group Inc. (HIG) has sought to instead focus on property-casualty coverage while Genworth Financial Inc. (GNW) has turned to long-term care policies.

“Protracted low interest rates have impacted all lines of the annuity business,” Joe Montminy, director of Limra annuity research, said in a statement on Monday. “The sustained uncertain economic environment has many companies implementing conservative risk management strategies.”

MetLife, the largest U.S. life insurer, reduced variable annuity risk by raising prices and limiting customers' ability to deposit funds in existing accounts. The insurer expects the sales decline to continue in the current quarter, Chief Financial Officer John Hele said on a Nov. 1 conference call with analysts. The firm took a $1.6 billion impairment related to the U.S. retail annuity business in the third quarter, citing a reduced value for the unit amid lower interest rates.

Client Buyouts

Hartford, based in the Connecticut city of the same name, said earlier this month it will offer to pay some clients to give up variable annuities as it works to cut risk. Axa SA's Axa Equitable and Aegon NV's Transamerica said this year they are offering similar buyouts.

Variable-annuity sales at Prudential Financial, the No. 2 U.S. life insurer, rose 32% to $5.9 billion, Limra said. The Newark, N.J.-based company is the largest seller of the retirement products this year.

MetLife's sales were more than $8 billion in the third quarter of 2011.

-- Bloomberg News --


What do you think?

View comments

Recommended for you

Featured video


Dynasty's Penney: Top RIA trends for 2018

What's next for RIAs? Dynasty's Shirl Penney talks about the growing numbers of entrepreneurial advisers. Plus, what inspired his own entrepreneurship.

Latest news & opinion

Meet our 2017 Women to Watch

Introducing 20 female financial advisers and industry executives who are distinguished leaders, advancing the business of providing advice through their creativity and hard work.

Raymond James executives call on industry to keep broker protocol

Also ask firms to pay for the administration of the protocol to 'ensure its longevity and relevance.'

Senate committee approves tax plan but full passage not assured

Several Republican senators expressed reservations about the bill, and the GOP cannot afford too many defections.

House passes tax bill, focus turns to Senate

Tax reform legislation expected to have more of a challenge in upper chamber.

SEC enforcement of advisers drops in Trump era

The agency pursued 82 cases against advisers and firms in fiscal year 2017, down from 98 the previous year.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print