As MetLife rightsizes, other players grow in US annuities
August 18, 2014 by Thomas Mason
While MetLife Inc. has made no secret of its efforts to scale back its exposure to the U.S. annuity market, the latest statutory data available shows a particularly steep drop in business for the life insurer. MetLife ranked seventh in the first quarter of 2014, after being in the top spot for the first quarters of 2013 and 2012.
The insurer is rightsizing its annuity business in an effort to find the right amount of risk it wants to assume, as Steven Kandarian, MetLife’s chairman, president and CEO, explained during an investor day held June 10. But he was also quick to assure listeners that the company is committed to the line. “I want to make sure that everyone understands that we are not moving away from the annuity business,” Kandarian said, according to a transcript. Starting in 2015, MetLife expects the business will start to grow again.
Sales of variable annuities at MetLife more than halved from 2011 to 2013, falling from $28.4 billion in 2011 to $10.6 billion in 2013, according to the slides prepared for the investor day. A recent analysis from SNL illustrated this drop as well, with MetLife sliding from a third-place ranking among U.S. variable annuity writers in 2012 to an eighth-place ranking in 2013.
At the same time, Jackson National Life Insurance Co. emerged as the front-runner in the U.S. annuities in the first quarter. The insurer, which is owned by London-based Prudential Plc, has had particular success with its Elite Access annuities. Overall variable annuity sales totaled $6.4 billion in the first quarter, with Elite Access accounting for about 17.2% of that total, as Tidjane Thiam, CEO of Prudential Plc, said during a May 8 investor call, according to a transcript. Per the website for Elite Access, the annuity offers over 100 investment strategies, including traditional investments, alternative investments and tactically managed strategies.
“We are experiencing very favorable conditions to write variable annuity business,” said Thiam. Key to this favorable environment has been the product and pricing initiatives that the company took in 2014, as well as higher long-term interest rates. But while Jackson National has been keen to grow, it has retained a “value over volume focus,” the CEO said, with new business profit in the U.S. rising by 67%, versus 39% growth in sales volume.
U.S.-based Prudential Financial Inc., meanwhile, saw a year-over-year decline in the first quarter. In other quarters, Prudential’s results have been skewed by large pension risk transfer transactions, which served to boost premiums by an inordinate amount. But this occurred in the fourth quarter of 2012, and therefore would not be an issue for the first-quarter numbers.
Variable annuities in particular have declined sharply for Prudential, as noted in SNL’s 2013 rankings (the variable annuity rankings should not have been skewed by the pension risk transactions, since those deals were accounted for as fixed annuities). Prudential explained the factors at work in a June 9 presentation. Whereas Prudential had been increasing sales from 2009 to 2012 amid a rising market, it pulled back in 2013 in an effort to adapt products to the current environment and to diversify risk. The slides showed gross sales rising from $16.3 billion in 2009 to $20.0 billion in 2012 then falling to $11.5 billion in 2013.
Methodology: The annuity rankings reflect SNL groups, which reflect the consolidation of entities within SNL-defined corporate structures, and unaffiliated single companies. These groups were adjusted to exclude certain entities in two instances: MetLife and Aflac Inc. For these groups, SNL excluded MetLife’s American Life Insurance Co. (DE) and Aflac’s American Family Life Assurance Co. of Columbus, since these units each write a significant amount of non-U.S. business.
Research and consulting company LIMRA also publishes data on new annuity sales. SNL’s analysis differs, however, in that it uses total annuity considerations, which reflect new business and the persistency of existing business in the form of renewal annuity considerations.
Thomas Mason is a senior analyst with Charlottesville, Va.-based SNL Financial. This article appeared on the SNL Financial website.
