MetLife has picked an arm of Talcott Resolution Life to reinsure U.S. retail variable annuities and annuity riders backed by about $10 billion in reserves.
Completing the deal would eliminate about $100 million in annual earnings.
But the deal should also cut investment hedging costs by $45 million per year, free about $250 million in capital, and cut MetLife's exposure to retail variable annuity account value by 40%, the company said.
MetLife said it would continue to handle all interactions with the annuity owners.
The planned transaction "will positively reduce the company's enterprise risk and substantially lower the company's variable annuity tail risk," MetLife CEO Michel Khalaf said today during a conference call with securities analysts.
What it means: Big U.S. insurers are continuing to shed some of the annuity account value they piled up during the last big annuity sales boom.
The deals could have more impact on the original issuers' earnings than on the clients, because, even when the original issuers pass risk on to reinsurers, the original issuers are responsible for keeping the benefits promises.
Talcott: Hartford Financial put its own life and annuity operations in Talcott in 2013, as it was streamlining after the 2007-2009 financial crisis.
Sixth Street, a San Francisco-based investment firm, acquired control in 2021.
Talcott has also made big reinsurance deals involving annuities written by companies like Allianz Life, Guardian and Principal.
The outlook: MetLife held the analyst call to go over results for the first quarter.
The company reported $879 million in net income for the quarter on $19 billion in revenue, up from $800 million in net income on $16 billion in revenue for the first quarter of 2024.
Khalaf said changes in interest rates, increased stock price volatility and a weakening U.S. dollar have increased uncertainty.
But "we've not yet seen cracks in the job market," Khalaf said. "Further, the primary profit driver mortality for our largest group product line, group life, is largely uncorrelated to the economy."
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