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

variable annuities, interest rates, stock market, volatility
+ Zoom

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

Latest news & opinion

DOL Fiduciary Rule: What you need to know about Acosta's decision

Labor Secretary Alexander Acosta confirmed that the agency's fiduciary rule will become applicable on June 9. Find out what advisers and firms should know when it goes into effect.

Acosta declines to extend delay of DOL fiduciary rule

Labor Secretary finds no legal basis to delay implementation; rule to become applicable June 9

Phyllis Borzi says opponents of DOL fiduciary rule face uphill climb to further delay or dilute it

Former assistant Labor secretary who crafted the rule says President Trump won't be able to get rid of it simply because he doesn't like it.

Advisers go on the offensive, getting clients ready for the next market correction

Some proactive planners are spelling out for clients the impact of a 10% or 20% correction.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print