Wondering if MetLife recognized the irony in naming their most currrent...
MetLife
The Metropolitan Life Insurance Company (MetLife) is a leading provider of insurance and other financial services to millions of individual and institutional customers throughout the United States.
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.
| MetLife Product Reviews |
|---|
Product Review of Preference Premier
There is an interesting feature available through this product that allows for... Product Review of MetLife Longevity Income Guarantee
Metlife is one of several insurance companies offering a longevity insurance... Product Review of MetLife Longevity Income Guarantee
There are 2 versions of MetLife's longevity annuity.
The first is what they... |
| Products Offered |
|---|
| General Information | |
|---|---|
| Website | http://www.metlife.com |
| Type | Insurance Company |
| Founded | |
| Ownership | |
| Country | USA |
| Contact Information | |
|---|---|
| Address | , |
| Phone | |
| Fax | |
Information & Articles about MetLife
|
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. Sources: MetLife |
|
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. Source: Bloomberg |
|
The term de-risk has been appearing frequently in recent financial news. General Motors’ recent decision to offer lump-sum pension buy-outs to 42,000 retirees is an attempt to reduce the company’s pension obligations with the hope of returning GM to investment grade status in the eyes of rating agencies. Commenting on the decision, GM’s CFO Dan Ammann mentions that the “actions represent a major step toward our objective of de-risking our pension plans and will further strengthen our balance sheet and give us more flexibility.” MetLife’s recent decision to de-risk their variable annuity portfolio is supported by CEO Steven Kandarian’s desire to increase capital efficiency, financial flexibility and ultimately return on equity. During a recent conference call with analysts, American International Group (AIG) CEO Robert Benmosche discusses the benefits of de-risking the company’s variable annuity products. The Volatility Control Fund attached to certain variable annuity products helps to de-risk variable annuity products from AIG’s perspective. While de-risking appears to have clear benefits for pension plan sponsors and insurance companies, financial services consumers and pension plan participants may want to consider the possibility that these gains and benefits are at their expense. After all, benefits do not come without a cost. The question is what the costs might be and who is assuming the costs. Variable annuity and related living benefit features are becoming much less attractive. These less rich benefits are essentially a cost that is passed along to potential buyers. Similarly, a lump-sum pension buyout might be much less compelling than a lifetime of pension payments. Financial risk does not just disappear. One party’s reduction in risk is likely passed along in some form to a counterparty--regardless of whether the receiving party is aware of the risk transfer. Source: Bloomberg |
Key Phrases:
Key Phrases:
While efforts are made to keep information on this page accurate and updated, the information shown on this page may be variable or out of date. Always check the issuing company's website or other public data listings for the latest information applicable to you as actual information may vary.
