Carrier aims to pull away from 'capital-intensive' products — including annuities
MetLife Inc. executives say that variable annuities will take a backseat to other product offerings as the insurer refocuses its U.S. business.
The life insurance company is aiming for about $18 billion in variable annuity sales this year, down considerably from the $28.4 billion in sales it picked up last year.
“We picked that number because we think it provides a better balance of risk for MetLife overall,” William J. Wheeler, president of the carrier's Americas division, said at a company presentation on Wednesday.
MetLife has been working on whittling down its variable annuity sales after it experienced a huge surge in demand for a living benefit that provided 6% growth of the income benefit base and 6% income withdrawals. That's the sort of benefit that has become hard to find due to low interest rates and rising hedging costs for carriers.
Mr. Wheeler had noted that while the company has turned its focus to its latest iteration of its rider, which provides a 5% growth of the benefit base and 5% income withdrawals, more changes will be forthcoming this year.
“We will continue to tweak the product, de-risk and improve its profitability in 2012,” he added.
Still, MetLife's VA business has an attractive risk profile: As of the end of March, the insurer had total VA liability balances of $152.1 billion, with about two-thirds of it being tied to a living benefit rider. Only 17% of the carrier's guaranteed minimum income benefit riders were “in the money” or worth more than the actual account value, said Mr. Wheeler. Further, only about 1% of the carrier's clients could actually annuitize their contract today, as it has a 10-year waiting period.
The insurer has sold about 375,000 contracts — $60 billion in sales — over the last three years, and out of all of those VAs, only 250 had a living benefit in the money as of the end of March, Mr. Wheeler said.
“We will manage this business prudently, carefully, but I think you can understand why we have no interest in exiting the variable annuities business,” he added.
Looking to raise its profitability, MetLife has highlighted a handful of potential product areas on which it will concentrate. Group life insurance, dental coverage and retail life have all been cited as areas with attractive return-on-equity potential. The insurer will also introduce accident and health coverage in the U.S.
