MetLife to get back in variable annuity game despite first quarter declines

Even after 54% drop in VA sales over the last year, the carrier is optimistic about sales with new mix of products

May 2, 2014 @ 2:18 pm

By Darla Mercado

First quarter variable annuity sales are down for MetLife Inc., but executives say the carrier is ready to get back into the game.

MetLife, once a top seller in the variable annuity industry, wound up selling only $1.6 billion in variable annuities during the first quarter ended March 31, down 54% year over year. The 2011 release of a VA living benefit rider that provided 6% growth of the income benefit base and 6% income riders previously boosted MetLife to the top, with that year's sales reaching $28.4 billion.

(More: MetLIfe: Doubling-down annuity sellers lack clarity, risk)

Generally, carriers' living benefits expose the companies to interest rate and market volatility risk. With that in mind, MetLife moderated sales volumes through 2012 by releasing increasingly conservative versions of the product. Eventually that 6% living benefit rider became a 4% rider. The changes have had their desired effect, and sales slowed to $10.6 billion in 2013.

Now, it seems, MetLife is ready to get back in the game.

“Since 2012, we're focused on right-sizing our variable annuity business to achieve an appropriate risk profile,” said Steve Kandarian, chief executive of MetLife, on a first-quarter earnings call Thursday.

(See also: Variable annuity sellers clamp down on payments to existing contracts)

“Looking forward, we are now in a position to pursue sales growth with our redesigned mix of products to have a more attractive risk-return profile,” he added. “We remain committed to the annuity business, as we see a substantial retirement savings opportunity in the United States.”

MetLife's return to the variable annuity sandbox, however, doesn't exactly mean that the carrier will go back to ramping up on living benefits. Product trends have changed considerably in recent years, and carriers are leaning more toward variable annuities that are centered on investment choice but offer no living benefits.

Other product innovations include hybrid annuities that are similar to indexed annuities and use structured products to protect clients' accounts from index declines. For instance, MetLife jumped into this business when it launched its Shield Level Selector annuity.

Executives at MetLife are open to considering other product evolutions aside from living benefits.

“[You've] seen a lot of sales, a much broader, diverse group of sales, where there is no living benefit rider [and] where the main motivation is tax efficiency or other things,” said Bill Wheeler, president of the Americas at MetLife, on the call.

“Our plan going forward is really to pursue all of those avenues,” he added. “Not just, 'Oh we got to have a more aggressive living benefit rider.' It's 'We've got to make sure we are in all the other kinds of variable annuity products to meet specific needs.'”

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