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Variable Annuity Sales Slide 7% as MetLife Cuts Back

Variable annuity sales in the U.S. fell for a second-straight quarter as MetLife Inc. (MET) limited offerings of the product to reduce risk.

Total sales dropped 7 percent to $36.8 billion in the first three months of 2012 from a year earlier, trade group Limra said today on its website. MetLife, the top seller in 2011, generated $4.93 billion and Prudential Financial Inc. (PRU) had $4.94 billion.

MetLife, the largest U.S. life insurer, has been scaling back to reduce risks from stock market declines. The New York- based firm said on April 27 that first-quarter sales fell 13 percent. The equity-linked annuities can provide guaranteed minimum income to customers regardless of market performance and lead to losses for insurers when stocks fall.

“We are still seeing companies carefully manage the risks” of guaranteeing investment gains, Joseph Montminy, Limra’s assistant vice president, annuity research, said in a statement.

MetLife has been offering lower returns on new offerings and said it expects full-year sales of about $18 billion after topping $28 billion in 2011.

“Our expectation is that the product and pricing actions we have taken will result in sales within the target range,” MetLife Chief Executive Officer Steven Kandarian said April 27 on a conference call.

American International Group Inc. (AIG), the bailed-out insurer, posted variable annuity sales of $2.25 billion, a 21 percent increase, while sales of fixed annuities fell by more than half to $1.07 billion, according to Limra.

“We are concerned about fixed annuities,” AIG CEO Robert Benmosche said on a May 4 conference call. “We don’t want to build a large book at low interest rates.”

Industrywide, fixed annuity sales fell 10 percent to $18 billion, Limra said. Total annuity sales slid 8 percent to $54.8 billion.

To contact the reporter on this story: Zachary Tracer in New York at ztracer1@bloomberg.net

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

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