Insurance juggernaut MetLife Inc. will rein in its variable annuities, as second-quarter sales surged beyond analysts' expectations.
Insurance juggernaut MetLife Inc. will rein in its variable annuities, as second-quarter sales surged beyond analysts’ expectations.
Cash poured into the carrier’s VAs, pushing second-quarter sales to $6.97 billion, reflecting a 55% increase year-over-year. The total exceeded the $5.14 billion originally forecasted by analysts at FBR Capital Markets, which also predicts a $23.4 billion total in VA sales at the insurer for 2011. Citigroup Inc. analyst Colin Devine had noted on the call that MetLife’s second-quarter sales levels set an all-time industry record.
The massive increase in sales follows the May release of MetLife’s Guaranteed Minimum Income Benefit Max, which offers 6% compounded growth and 6% withdrawals per year of the benefit base. Advisers were keen on the product, as many competitors are offering benefits at a lower rate. MetLife also has a strong adviser following for its GMIB Plus III, which allows for 5% withdrawals.
MetLife’s market share grab comes at a time when its largest competitors have either signaled that they’d slow variable annuity sales, in the case of Jackson National Life Insurance Co., or have tamed their product, as Prudential Financial Inc. did at the beginning of the year.
But executives at MetLife are keeping a wary eye on their VA volume and made a filing in June with the Securities and Exchange Commission to change the features. The new versions of the GMIBs are slugged GMIB Max II and GMIB Plus IV, according to Morningstar Inc.
“Like all of our businesses, we look for balanced growth,” Steve Kandarian, chief executive of MetLife, said during a conference call with analysts this morning. “We wouldn’t want any one part of the business to overwhelm other parts.”
He added that the insurer will make adjustments to the features on its variable annuities, but did not describe what those changes will be. MetLife expects to share details on the changes in August.
“When we put out the GMIB Max, we had to make a call about what would be competitive in the marketplace,” Mr. Kandarian said. “We thought it was an attractive product for customers, and it reduced risk for MetLife — a win-win.” But the product’s concept, which includes the use of four tactically managed portfolios, was drawn up last December and a lot has changed since then.
“The feature we put in place really dated back to a December time frame in market conditions,” Mr. Kandarian said. “December to August is a great deal of time in terms of changes that have gone on.”
When contacted for additional comment, Holly Sheffer, a spokeswoman for MetLife, reiterated Mr. Kandarian’s thoughts, noting that “the company is focused on disciplined growth and balancing sources of risk across our business lines.”
