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Life Health > Annuities > Fixed Annuities

Earnings: MetLife, AIG, Lincoln, Prudential, Others

By Allison Bell

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Insurers have been painting a mixed picture of fourth-quarter 2004 conditions this week.[@@]

Some carriers have been reporting good results, but others, including some with solid profits, are expressing concerns about competitors’ prices on products such as fixed annuities.

- American International Group Inc., New York, is reporting $3 billion in net income for the latest quarter on $26 billion in revenue, up from $2.7 billion in net income on $22 billion in revenue for the fourth quarter of 2003.

AIG’s worldwide life and retirement operation increased its operating income for the quarter to $2.4 billion, from $1.9 billion, but domestic annuity results were soft. Although individual annuity profits were up, the domestic annuities attracted only $1.3 billion more cash than they lost, down from a positive net flow of $2.7 billion for the fourth quarter of 2003. Net flow into individual variable annuities fell to $152 million, from $322 million.

“Rising short-term interest rates in the latter part of 2004 and aggressive competitor pricing contributed to the difficult sales and net flow comparisons, but we have developed strategies to deal with the changing environment,” AIG says in a comment on the domestic annuity operations. “The company will remain disciplined in pricing and return requirements.”

- MetLife Inc., New York, is reporting $511 million in net income for the latest quarter on $10 billion in revenue, compared with $701 million in net income on $9.5 billion in revenue for the fourth quarter of 2003.

Net income fell in part because of the loss of $228 million in profits from State Street Research, Boston, and other operations that MetLife sold during the year.

First-year premiums rose to $497 million for fixed annuities, from $275 million, but fell to $2.1 billion, from $2.6 billion, for variable annuities.

- Prudential Financial Inc., Newark, N.J., is reporting $578 million in net income for the latest quarter on $7.4 billion in revenue, up from $575 million in net income on $7.1 billion in revenue for the fourth quarter of 2003.

Net results include $158 million in losses on investments that Prudential sold, wrote off or wrote down during the quarter.

The company’s annuity sales fell to $1.4 billion, from $1.6 billion.

- Lincoln National Corp., Philadelphia, is reporting $190 million in net income for the latest quarter on $1.3 billion in revenue, compared with $194 million in net income on $1.7 billion in revenue for the fourth quarter of 2003.

Lincoln National is reporting a net flow of $145 million into its fixed annuities, down from $235 million for the fourth quarter of 2003, and a variable annuity net flow of $649 million, up from $300 million.

- Nationwide Financial Services Inc., Columbus, Ohio, is reporting $142 million in net income for the latest quarter on $1.1 billion in revenue, up from $104 million in net income on $997 million in revenue for the fourth quarter of 2003.

Nationwide’s individual variable annuities lost $361 million more cash than they attracted, compared with a net flow of $49 million into the annuities during the fourth quarter of 2003. The company’s individual fixed annuities lost $95 million more than they attracted, down from a net flow of $69 million into the annuities.

“Market conditions and price competition in the fixed annuities market continue to create an environment in which it is difficult to sell fixed annuities while earning a return above our cost of capital,” Nationwide says in a discussion of annuity results. “As we continue to adhere to our pricing discipline in this environment, sales of this product will be pressured.”

- Aetna Inc., Hartford, is reporting $301 million in net income for the latest quarter on $5.2 billion in revenue, up from $249 million in net income on $4.6 billion in revenue for the fourth quarter of 2003.

The managed care company ended the quarter providing or administering health coverage for 14 million people, up from 13 million people a year earlier.

- CIGNA Corp., Philadelphia, cut revenue but increased profit margins during the fourth quarter by shedding unprofitable group health customers.

The managed care company is reporting $558 million in net income for the latest quarter on $4.3 billion in revenue, compared with $281 million in net income on $4.5 billion in revenue for the fourth quarter of 2003.

The company ended the quarter providing or administering health coverage for 9.7 million people, down from 11.5 million people a year earlier.

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