MetLife is one of the largest and strongest providers of variable annuity products in the United States and abroad. The company also offers products in the areas of life insurance, disability insurance, retirement savings, auto insurance, dental insurance, employee benefits and banking services.
MetLife serves 90 million people in over 50 countries and is a publicly listed company on the New York Stock Exchange.
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Information & Articles about MetLife
The U.S. longevity insurance market has been developing for almost a decade, and yet there are still only a handful of insurance companies providing retail longevity annuities.
That said, current environment interest rate environment is challenging for providers of fixed annuities--particularly those companies that need to respond to the shorter-term demands of shareholders.
MetLife was an early leader in the market for longevity insurance with a product for the defined contribution market. The focus here, though, is the retail market. In other words, the focus is on products that are provided directly to individuals (retail offerings) rather than longevity annuities that are offered through 401(k) plans.
The following is a list (in alphabetical order) of the companies that currently provide retail longevity insurance. We will attempt to keep this list current and comprehensive over time, and we welcome input from readers regarding products not on this list that are either available or in development.
Again, MetLife was a leader with a longevity insurance offering for the 401(k) market almost a decade ago.
MetLife’s current retail offering is the Longevity Income Guarantee.
New York Life has had quite a bit of success with its longevity annuity. Initial sales exceeded expectations and totaled almost $250 million in the first six months.
New York Life’s longevity annuity is called the Guaranteed Future Income Annuity
4) Nortwestern Mutual
Northwestern Mutual recently came to market with their longevity annuity.
Northwester Mutual’s longevity annuity is the Select Portfolio Deferred Income Annuity
Symetra’s longevity annuity offering is the Freedom Income Annuity
6) The Hartford
The Hartford recently sold its annuity operations to Forethought Fianncial Group.
Guardian Life's longevity insurance product is the SecureFuture Income Annuity.
The variable annuity industry in the U.S. is highly concentrated. Ten insurance companies generate roughly 80 percent of industry revenue, and the top 20 companies generate over 90 percent of total sales.
A meaningful signal is sent when five of the top 20 variable annuity companies announce that they are either exiting the business entirely or paring-back existing product lines.
This is exactly what has taken place over the past several months with the following companies dialing down their variable annuity exposure or pulling-out entirely:
Equity market volatility and low interest rates are the common themes running through the most or all of the retrenching decisions. There are a few way in which high volatility and low interest rates can hurt the companies that provide variable annuities:
MetLife’s recent investor conference call sheds some light on the return on equity issue. During the call, MetLife categorizes its product lines based by level of ROE. There are three ROE categories: 1) greater than 15 percent; 2) 10 - 15 percent, and; 3) less than 10 percent.
Retail annuities (including variable annuities) are in the less than 10 percent ROE bucket. Included in this less than 10 percent bucket are other capital intensive business lines that require “margin improvement.”
MetLife also alludes to capital intensity and the level of economic capital required in the variable annuity business. Economic capital refers to the amount of capital that needs to be set aside to deal with the risks in a particular line of business. Perceived risk is high in the capital markets right now, so economic capital requirements are high as well.
The capital intensity theme was a major factor for The Hartford as well. The argument in favor of leaving the VA business was based on the notion that capital could be allocated to more flexible and less intensive areas such as property and casualty lines.
A point to consider, though, is that all of these value assessments require the assumption that capital market conditions will continue to be as extreme as they have been over the past several years.
MetLife sheds some light on the glass half full perspective when they talk about the potential leverage in their variable annuity business. Some points to consider:
It seems that recent market volatility and ultra low interest rates could be distorting the perspectives of variable annuity issuers and the perspectives of certain shareholders of these companies.
Maybe the world has entered a permanent state of high volatility and low interest rates. Then again, maybe it has not. In any event, there is at least a possibility that current perspectives on the variable annuity business are distorted by an overemphasis on recent experience.
Despite a barrage of negative press, it appears that SunAmerica’s measured approach to the variable annuity business is demonstrating that the successful production of variable annuities is similar to most other lines of insurance.
The Hartford’s recent decision to exit the variable annuity business entirely is attributable in part to their management’s (under significant shareholder pressure) view that the VA business is capital intensive and has relatively unattractive economics compared to certain property and casualty lines.
Similarly, MetLife’s recent investor presentation focuses in part on the company’s decision to dial-down their variable annuity offerings in light of market volatility, capital intensity and return on equity levels that are less attractive than other product lines in their portfolio.
In a recent Bloomberg interview, though, AIG CEO Robert Benmosche discusses SunAmerica’s continued traction in the U.S. variable annuity market.
Benmosche sums-up their position through a tortiose and hare analogy. Slow and steady wins the race, and the tortoise is now pulling ahead in what has become a much more rational pricing environment for variable annuities.
Like any insurance business, grabbing market share at any price will ultimately come back to haunt while pricing appropriately for a given risk and having the stomach to turn away business is what will win in the end.
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