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
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