Variable Annuity Sales Fall 27% as MetLife Takes Lead (Update2)

By Andrew Frye
Bloomberg News
May 27, 2009

May 27 (Bloomberg) -- Variable annuity sales in the U.S. plunged 27 percent in the first quarter and MetLife Inc. claimed the top spot as other life insurers, battered by losses on the retirement products, scaled back their offerings.

Sales were $30.7 billion in the three months ended March 31, compared with $41.9 billion the same period a year earlier, the trade group LIMRA said today in an e-mailed statement. New York-based MetLife, which ranked fourth in the first quarter last year, boosted its sales 17 percent to $3.74 billion, the only provider in the top nine to post an increase.

Funds backing variable annuities are generally invested in stocks, and when markets decline the losses can be shouldered by both savers and insurers. That's depleted capital at carriers including Hartford Financial Services Group Inc. and Prudential Financial Inc. and created opportunity for MetLife, the biggest U.S. life insurer.

"We love the variable annuity business," MetLife Chief Executive Officer Robert Henrikson said in a February conference call. "The need for the product -- both in terms of downside protection for the consumer and the increasing focus on need for retirement income -- the need is as great or greater" after stocks dropped last year.

The Standard & Poor's 500 Index dropped 38 percent last year, its worst performance in at least half a century as the U.S. fell into recession. The index is down 1.1 percent since Dec. 31.

Hartford, Prudential

Hartford, which has accumulated more than $4 billion of losses in the past three quarters, fell to 14th place from seventh as sales dropped 72 percent. Newark, New Jersey-based Prudential, the No. 2 life insurer, posted a 25 percent decline.

Savers have been increasing holdings in fixed annuities, which offer more protection when markets decline. Sales of fixed annuities climbed 74 percent to $35.6 billion, marking the first time since 1995 the products outsold variable annuities for two straight quarters.

Consumers are "still leery of the volatile stock market and looking for secure, competitive guaranteed rates of return," said Joe Montminy, a research director for LIMRA, in the statement.

Allianz SE's North American subsidiary, which placed 10th, had a 68 percent jump in first-quarter sales.

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