Much of the discussion at yesterday’s MetLife Investor Day conference took a deep dive into the company’s variable annuity line and how it’s managing those currently troublesome products. Though stressing it was a business the company is committed to, MetLife executives detailed the various strategies it now employs and others it may consider to compress risk in its variable annuities.
“There are risks there, no question,” said Steven A. Kandarian, chairman, CEO and president of MetLife. “But they are manageable risks and we are managing them. We are taking proactive steps. There is actually upside to that business. In a more normal interest rate environment with equities continuing to perform well over time, that business has significant upside.”
Risk-lessening strategies include raising fees, reducing benefits and clamping down on overall sales. However, Eric Steigerwalt, executive vice president and head of U.S. Retail, acknowledged in response to a question from an analyst in attendance that the firm has considered whether to tender buyout offers to VA holders.
“We are researching everything,” he said. “But given what you have heard here today, we don’t need to buy back what we’ve put on the books. We think we have a pretty good risk profile here. As a result, if we can find a couple of places where it would be appropriate for the client and helpful to MetLife, we could do something like that. Right now, we have not announced anything. We don’t intend to announce anything tomorrow. But we’re thinking about every possibility.” Steigerwalt then went on to reiterate the firm’s commitment to the product line. “We’re still in this business, and we’re committed to running it properly.”
The company has targeted a lower VA sales goal of between $10 billion and $11 billion in 2013, down from a high of $28.4 billion in 2011 and $17.7 billion in 2012. For its GMIB MAX V variable annuity, the roll-up rate was lowered to 4 percent from 5 percent, and the withdrawal rate was reduced from a range of between 4.5 percent and 5 percent to 4 percent.
Both Hartford and Transamerica have already introduced voluntary buyback programs, which, if accepted, give policyholders cash if they void their lifetime benefits. Many variable annuity carriers have also raised fees and pared down rich benefits as well.