Variable-Annuity Sales Rise 11% as Prudential, AIG Post Gains
Variable-annuity sales in the U.S. posted the biggest increase since 2007, led by gains at Prudential Financial Inc. and American International Group Inc.
Sales climbed 11 percent to $35.5 billion in the second quarter from $32.1 billion in the year-earlier period, the trade group Limra International said in data posted on its website. Prudential, the second-biggest U.S. life insurer, was ranked first in variable annuities with $5.3 billion in sales, up from $3.38 billion in the same period a year ago, Limra said today.
Life insurers boosted sales of equity-linked variable annuities in 2010 after seven straight quarters of declines. Carriers have raised prices, as declining stock markets increase the risk insurers will shoulder losses on customers’ guaranteed minimum returns. The Standard & Poor’s 500 Index plunged 12 percent in the second quarter.
“We are finally seeing signs of recovery,” said Joe Montminy, assistant vice president for Limra’s annuity research. “There was broad market growth as most companies in the top 20 experienced variable-annuity sales growth.”
AIG, the insurer rescued by the U.S. government, boosted sales 45 percent to $1.58 billion from $1.09 billion a year earlier. Variable annuity sales at AIG plunged 42 percent in 2009 from the prior year, as broker-dealers shunned the company’s products after its 2008 near-collapse.
‘Big Shakeup’
AIG’s operating profit rose 17 percent in the second quarter fueled by results in its U.S. life insurance unit, the company reported on Aug. 6. Profit from U.S. life businesses quadruped from the same period last year as investment income climbed on private-equity and hedge fund results.
“This market’s been going through a big shakeup,” said Mark Grier, vice chairman of Newark, New Jersey-based Prudential Financial, in a conference call on Aug. 5. “Players have exited or significantly reduced their level of aggressiveness in the market, while new players are entering.”
MetLife Inc., the biggest U.S. life insurer, was No. 2 in sales for the second quarter at $4.5 billion, a slide of less than 1 percent from the year-earlier period, Limra said. TIAA- CREF, the retirement-planning firm, was third with $3.5 billion. Jackson National Life, the U.S. unit of London-based Prudential Plc, posted $3.7 billion, making it the fourth-largest.
Insurers including Hartford Financial Services Group Inc., based in the Connecticut city of the same name, posted losses in 2009 and 2008. Hartford CEO Liam McGee said in April he’d avoid focusing on variable annuity sales. Sales at Hartford declined 45 percent to $386 million in the second quarter.
Axa, John Hancock
Axa Equitable declined by about 9.8 percent to $1.68 billion. John Hancock, a U.S. unit of Toronto-based Manulife Financial Corp., fell to 15th place from fifth after sales slumped 57 percent to $743 million.
U.S. insurers sold about $128 billion in variable annuities in 2009, compared with about $156 billion in 2008, according to Limra. Sales in the first half of this year have improved 7.6 percent to $67.9 billion compared with the same period last year.
To contact the reporter on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net.
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