Bloomberg News

Variable Annuities End Streak of Gains as MetLife Retreats

February 17, 2012

(Updates with quote in fifth paragraph.)

Feb. 16 (Bloomberg) -- U.S. variable-annuity sales fell for the first time in seven quarters as insurers including MetLife Inc. seek to reduce risk.

Fourth-quarter sales fell less than 1 percent industrywide to $38.4 billion after increasing for six straight quarters when compared with a year ago, trade group Limra said today on its website. MetLife, the largest U.S. life insurer, said sales of the products declined 16 percent in the period to $7.2 billion from $8.6 billion in the third quarter, according to a Feb. 14 statement from the New York-based company.

“One of our guiding principles at MetLife is to strike the right balance between growth, profitability and risk,” Chief Executive Officer Steven Kandarian said yesterday on a conference call. “We are committed to actively managing the level of our variable-annuity sales.” MetLife was the No. 1 seller of variable annuities in the U.S. in the second and third quarters, according to Limra data.

Variable annuities, which provide guaranteed incomes to customers regardless of market performance, can lead to losses for insurers when equities plunge. Sun Life Financial Inc., Canada’s third-largest insurer, posted a $525 million fourth- quarter net loss this week fueled by the guarantees after saying on Dec. 12 it will stop selling variable annuities in the U.S.

Managing Risk

“Companies are looking to manage their risk in the kind of products they’re offering, and as a result it has had an impact on the sales,” Joseph Montminy, Limra’s assistant vice president of annuity research, said in a telephone interview. “We do think going forward the sales will level off in 2012 around the same level as in the fourth quarter.”

Consumer demand for investments with guaranteed lifetime income is climbing. While total annuity sales slowed in the third and fourth quarters, double-digit growth in the first half of 2011 resulted in an 8 percent increase from a year ago to $240.3 billion, Limra said today.

MetLife said on Feb. 1 it had reassigned Michael Farrell, previously head of U.S. distribution. William Wheeler, who heads the Americas division, said on Dec. 5 that 2011 sales were “obviously much more than we had expected” and MetLife would “take the steps necessary to get that back into its proper risk profile.”

--Editors: Dan Reichl, Dan Kraut

To contact the reporter on this story: Andrea Ludtke in New York at aludtke@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net


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