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MetLife Leads Variable-Annuity Sales as Top Firms Gain Share

MetLife Pressed by SEC for Details on Alico Reserve Shortfal
The Metlife logo is displayed outside of their headquarters in New York. Photographer: Robert Caplin/Bloomberg

Aug. 18 (Bloomberg) -- MetLife Inc., the largest U.S. life insurer, regained the top spot in variable-annuity sales in the first half of the year, leading a group of five firms expanding their dominance in the industry.

Sales rose 19 percent to $80.7 billion in the six months ended June 30 compared with the same period a year earlier, trade group Limra said today on its website. MetLife, based in New York, sold $12.6 billion of the retirement products, overtaking No. 2 Prudential Financial Inc. at $11.3 billion.

Sales of equity-linked variable annuities have increased as consumers sought guaranteed returns amid stock-market declines. The top five sellers of variable annuities in the U.S. accounted for 56 percent of the industry’s sales in the six months ended June 30, according to Limra data. That compares with 42 percent in the same period three years earlier.

“The biggest concern that these companies have is that the demand for variable annuities has been rising,” said Steven Schwartz, an analyst at Raymond James & Associates Inc. “At the same time, you have had a real narrowing of the market concentration” that increases the potential losses at the firms that lead the industry.

Market volatility since the end of the second quarter may reduce companies’ earnings in the near term, Moody’s Investors Service said in a note today. The Standard & Poor’s 500 Index has fallen about 14 percent since June 30 amid signs that the economy is slowing.

Shares Decline

MetLife declined $1.92, or 5.7 percent, to $31.87 at 4:07 p.m. today in New York Stock Exchange composite trading, and has slipped about 27 percent since June 30. Prudential fell $3.74, or 7.4 percent, to $47.15 and is down about 26 percent in the current quarter.

MetLife boosted its ranking after improving terms for clients on one of its products, said Schwartz. Ratings firms don’t want to see insurers too concentrated in variable annuities because it increases their exposure in one area, he said. In addition to variable annuities, MetLife sells other retirement products, life insurance and auto and home coverage.

“We wouldn’t want any one part of our business to overwhelm other parts of the business,” MetLife Chief Executive Officer Steven Kandarian said last month on an call with analysts after being asked whether he was comfortable with the rise in variable-annuity sales. “We look for balanced growth.”

Prudential Plc’s Jackson National Life unit was the No. 3 variable annuity seller in the first half of 2011, followed by TIAA-CREF and Lincoln National Corp., according to Limra.

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

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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