Annuity FYI Blog

According to Insurance Networking News’ Justin Stephani, “Annuity Writers Show Significant Growth.”  In a fixed annuity study performed by Beacon Research, they found that despite an annuity rates comparison showing declining interest rates, fixed annuity sales increased 8% quarter to quarter and 3% year to year.  These results from the first half of this year coincide with similar reports from LIMRA and the Insured Retirement Institute.  LIMRA found a 19% year over year increase for total annuity sales, in the period ending June 30.  The IRI reported a 10% increase for the second quarter’s year over year figures and a quarterly sales increase of 4%.

Beacon research was expecting increases in the indexed and income annuity products, especially because indexed annuity cap rates are still desirable compared to other choices.  They were expecting declines in both types of fixed annuities because of low interest rates, but only saw a decline in one of them.  Fixed rate non-market value adjusted (MVA) annuities were the only category to decline, dropping 5%.  Fixed rate MVA’s actually increased 4%, probably because investors seeking higher yields were happy with the slightly higher rates offered.  Income annuities increased 30% and indexed annuities went up 18%.  Western National Life sold more than $2 billion in fixed annuities for the top spot, followed by Allianz and New York Life.

Written by Rachel Summit

Fixed annuity sales increased 6% in the first quarter of this year to a level of $18.9 billion.  The Annuity News Journal article; “Sales of Fixed Annuities are Making a Comeback” by Zachary Dristol, says that sales increased in all four types of annuities.  Book value annuities increased by 12%, moving to $8.6 billion in assets.  Market value adjusted annuities increased by 7% and income based annuities increased by .8%.  While there was only a minimal .2% increase in indexed annuity products, their increases over the past year or so have been so significant that the assets are still very high.

From the fourth quarter of last year to the first quarter of this year, book value annuity assets increased by 42%.  In the same time frame, annuity sales in general increased by 7%.  Beacon Research’s CEO said that increasing annuity rates during the first quarter were likely the reason for the fixed annuity sales increase.  In comparison to fixed and variable annuities, indexed annuity products lost some ground probably just due to seasonal changes.  After the financial crisis of 2008, the annuity industry worked hard to distance itself from AIG and be seen for their guaranteed retirement income again.  The top five annuity sellers in the first quarter were Western National, New York Life, Allianz, American Equity, and Aviva.

MetLife is one of the top life insurance companies, and their annuity products are a big reason why.  According to “MetLife Annuities See Positive Outlook” by Errol Baddoo of the Annuity News Journal, the company’s annuity sales are soaring.  While they didn’t take first place in annuity sales in 2010, MetLife’s annuity sales of almost $21 billion made the top 5.  Their variable annuities sold $18 billion in 2010, a 19% increase from 2009.  While fixed annuity sales declined by 65%, they still accounted for around $2 billion in sales for MetLife.  Fixed annuities skyrocketed in popularity during the recent economic crisis because of their stability in a volatile marketplace.  As the economy has improved and variable annuities have increased in popularity, it only makes sense to see somewhat of a decline in fixed annuity sales.

MetLife’s newest variable annuity, a joint force with Fidelity Investments, is called the MetLife Growth and Guaranteed Income variable annuity.  In its first 12 months in the marketplace, this new variable annuity accounted for $1 billion in sales.  Some of MetLife’s other products include multiple annuity offerings like the 401k annuity, life insurance, other insurance plans, and a plethora of other retirement plan options.  Their biggest competitors are AIG, Hartford Financial, and Prudential Financial, the last of which took the top spot in annuity sales in 2010 with $23 billion.  MetLife’s stock value of $48.83 is 10% higher than the current market price, according to the Trefis stock price estimate.  Annuity products make up around 17% of the stock value for MetLife.  The company expects their newest variable annuity and other annuity products to add even more sales in 2011.

According to NASDAQ article “Positive Outlook for MetLife Annuity Sales,” the Trefis Team says that MetLife’s new variable annuity has accounted for over a $1 billion in sales in just one year.  MetLife teamed up with Fidelity Investments to offer the MetLife Growth and Guaranteed Income (MGGI) variable annuity, which is very popular among investors.  MetLife offers many different annuities, insurance products and retirement plans.  Their main competition comes from Prudential, AIG and Hartford.

The Trefis Team estimates MetLife’s stock price at $48.83 and they say that 17% of that can be attributed to the company’s annuity sales in the U.S.  That price estimate is about 10% higher than the market price because of MetLife’s improved outlook.  They had the second highest annuity sales in 2010, selling close to $21 billion.  Variable annuity sales were more than $18 billion and fixed annuity sales were just over $2 million.  Although MetLife saw a decline in fixed annuity sales, their variable annuity sales increased by 19%.  Prudential was the only company to have higher annuity sales in 2010, with sales over $23 billion.

Fixed annuity sales saw a large decline last year partly because of the large increase they saw in 2008 and 2009 during the economic crisis.  Investors were looking for less risky investments and sought the comfort of fixed annuities.  As investors switched back to taking on more risk, they went back to variable annuities hoping to see large increases in their investments.  Overall variable annuity sales in the market increased 11% in 2010, while fixed annuity sales decreased.  The total annuity premiums for MetLife last year were $875 million, which was an increase of 40% over their total annuity sales in 2009.  The Trefis Team expects continued growth in annuity sales for MetLife.

Analysts from Citigroup changed their tune about Prudential’s outlook going into the future, according to Annuity News Journal’s Steve Thompson.  In the article “Prudential Outlook Brighter According to Citigroup,” we learn that the acquisition of two of AIG’s Japanese units is likely to be beneficial for Prudential.  Japanese investors who were worried about the value of their annuity products and life insurance with AIG are confident in the security that Prudential now brings to them.  Prudential is the number one foreign life insurance company in Japan, which should only be strengthened after their acquisition of AIG’s Star Life Insurance and Edison Life Insurance.

Prior to the changes made by Citigroup’s analysts in late February, they had projected lower earnings per share and stock value for Prudential.  They had put a Hold on Prudential’s ratings as well.  Prudential looks to expand their sales of the best annuities and life insurance for their Japanese customers after the acquisition of AIG’s units.  Both Star and Edison Life Insurance companies will be run by Prudential’s entity Gibraltar Life Insurance Company.  Citigroup’s projected earnings per share for Prudential in 2011 are $6.60 and in 2012 they are $7.60.  They expect long term investors to be pleased with the performance of their investments with Prudential.  While the first two months of 2011 showed economic improvements, the analysts’ caution that the overall economy in both the United States and Japan will continue to effect financial institutions.  It remains to be seen what the devastating earthquakes and tsunami in Japan will do to the financial markets.