Three major insurers held their second-quarter earnings calls yesterday and while the financials varied for each, variable annuities played a part in the discussions. The comments, even when the results seemed positive, underscore the difficulty of insuring annuity products in today’s economic landscape.
Prudential reported that gross variable annuity (VA) sales in Q2 hit $5.3 billion, up from $4.5 billion a year ago. Charles Lowrey, COO of Prudential’s U.S.-based businesses, said the sales “were slightly higher than we wanted, but not higher than we expected.” The insurer averages about $5 billion in VA sales per quarter, he added.
The company has announced plans to launch a new VA product, the Highest Daily Lifetime Income Benefit 2.0, or HDI 2.0, which will increase the rider fee to 100 basis points on individual contracts, raise the minimum issue age by five years to age 50; and will reduce the payout rate from 5% to 4% for the age 59-and-half to 65 band.
“We try to manage any acceleration in sales as carefully as we can,” said Lowrey. “Having said that, we’d expect sales to trend down somewhat over time, and that’s what we hope for.”
Meanwhile, at MetLife, variable annuity sales totaled $4.6 billion, a decline of 34%. In May, the company revealed its plans to scale back VA sales in favor of accident and health products in the U.S.