Prudential Plc builds U.S. annuity lead with $12.7 billion sales

(Bloomberg) — Prudential Plc, the largest U.K. insurer by market value, extended its lead in U.S. variable annuity sales at its Jackson National Life unit as rivals scaled back.

Jackson sold $12.7 billion of the retirement contracts in the first six months of 2014, an increase of 24 percent from a year earlier, according to data released yesterday by the Limra Secure Retirement Institute. Industrywide sales fell 4 percent to $70.4 billion.

Prudential Chief Executive Officer Tidjane Thiam is counting on profit from the U.S. and growth in Asia after individual annuity sales slumped in the U.K. when the government abandoned rules that had pushed consumers to buy the retirement products. In the U.S., the insurer has been emphasizing the breadth of options in its Elite Access product, including offerings from BlackRock Inc. and Jeffrey Gundlach’s DoubleLine Capital LP.

“Most of the growth right now is coming from the Elite Access,” Greg Cicotte, president of Jackson’s distribution arm, said in an interview. “If Elite Access continues to perform the way it has since launch, then I would be very happy and comfortable with us continuing to grow our variable annuity sales.” The company began offering the product in 2012.

Jackson’s pretax operating income in the first half of 2014 climbed 20 percent to $1.1 billion, fueled by increased annuity sales and higher assets under management, the Lansing, Michigan- based unit said Aug. 12.

MetLife Inc., the largest U.S. life insurer, was the top variable annuity seller in 2011, before scaling back as CEO Steve Kandarian worked to reduce the insurer’s risk from market slumps. Newark, New Jersey-based Prudential Financial Inc. was No. 1 in 2012, and Jackson took the top spot last year.

Lincoln, AIG

Lincoln National Corp. retained the No. 2 post as first- half sales fell 11 percent to $6.42 billion. TIAA-CREF came in third, with $6.38 billion. At American International Group Inc., variable annuity sales rose 12 percent to $6.17 billion, putting the firm at No. 4.

Variable annuities offer tax deferral for savers and can guarantee a stream of payments. Jackson and Lincoln are among insurers working to increase the proportion of annuities that are sold without so-called living benefits. Those guaranteed minimum returns can pressure insurers’ finances when stocks tumble, as they did in the financial crisis.

Some firms have limited the risks tied to the guarantees by forcing clients to hold both stocks and bonds, or by requiring investments in funds that change their holdings based on market fluctuations. That’s increased the appeal of Jackson’s offerings, which don’t restrict allocations, said Judson Forner, director of investment marketing at ValMark Securities Inc.

Shunning Constraints

“They have a niche that no one else shares,” Forner said. “Your investment-oriented advisers, many of them have been unwilling to accept the constraints.”

Prudential Financial was No. 5 in the first half, selling $4.95 billion of variable annuities, down from $6.63 billion a year earlier. Sales fell to $3.21 billion from $6.26 billion at New York-based MetLife, which was No. 8.

Allianz SE’s U.S. business was the top seller of fixed annuities, followed by policyholder-owned New York Life Insurance Co. and AIG.

–With assistance from Sarah Jones in London.