U.S. Variable-Annuity Sales Increase as Prudential, MetLife Report Gains

Variable-annuity sales in the U.S. rose for the fourth straight quarter amid gains by the two biggest U.S. life insurers, MetLife Inc. and Prudential Financial Inc., as stock markets advanced.

Sales climbed to $38.5 billion in the fourth quarter from $33 billion a year earlier, trade group Limra International said yesterday in data posted on its website. Prudential said on Feb. 9 that gross individual annuities sales rose to $6.1 billion in the fourth quarter from $4.8 billion a year earlier. New York- based MetLife, the largest U.S. life insurer, posted a 38 percent increase in variable annuity sales to $5.1 billion.

Sales of equity-linked variable annuities have increased as stock markets rebounded from March 2009 lows, cutting the risk companies will take losses on customers’ guaranteed returns. The Standard & Poor’s 500 Index surged 23 percent in 2009 and 13 percent in 2010.

“The public companies in the variable annuities business had very strong sales,” Steven Schwartz, an analyst with Raymond James & Associates Inc., said in an interview. “The equity markets are strong. That helps variable annuity sales.” He rates MetLife “market perform” and Prudential “outperform.”

Sales may increase further as investors regain confidence, said Robert Sollmann, executive vice president of retirement products at MetLife.

Growth Coming

“The industry is poised for growth,” he said at a conference in Miami on Feb. 11. “As people become more confident about putting their money back into the stock market, the VA industry, and certain companies in particular, are incredibly well positioned to capture a potentially very large share of those flows.”

Insurers lost money on the products in 2008 and 2009 because the funds backing them are generally invested in stocks. The S&P 500 declined 38 percent in 2008.

Major sellers of variable annuities, including MetLife, Prudential and Lincoln National Corp. may have increased sales as representatives advertised the products to investors before terms changed, said Schwartz.

MetLife is reducing the guaranteed payout rates for its main variable annuity product to control risk, according to Sollmann. Prudential made a “modest price increase,” Stephen Pelletier, president of Prudential’s U.S. annuities business, said in an interview on Jan. 24.

“We’re always looking at our product design, looking at it from the standpoint of being competitive in the business and responsible as far as the risk,” he said.

Annual Sales

Industrywide, sales for the full year climbed to $141 billion from about $128 billion a year earlier, according to Limra. MetLife and Newark, New Jersey-based Prudential have boosted sales in the U.S. since 2008.

Prudential, which declined a bailout in 2009, jumped to No. 1 among sellers of variable annuities in the U.S. that year. MetLife was the No. 2 seller through the first nine months of 2010, according to Limra data. The trade group hasn’t published market-share rankings for the fourth quarter.

“The big guys are getting bigger,” said Schwartz. “Some of the small guys have left.”

Genworth Financial Inc. said last month that it was ending sales of new retail and group variable annuities and would take a $12 million charge in the first quarter associated with the action. The Richmond, Virginia-based mortgage guarantor and life insurer wasn’t among the top 20 sellers of variable annuities in the U.S. in the first nine months of 2010, according to Limra.

To contact the reporter on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net

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

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