(Bloomberg News) Variable-annuity sales in the U.S. rose for the fourth straight quarter amid gains by the two biggest U.S. life insurers, MetLife Inc. and Prudential Financial Inc., as stock markets advanced.
Sales climbed 17%, to $38.5 billion in the fourth quarter from $33 billion a year earlier, trade group Limra International said yesterday in data posted on its Web site. Prudential said on Feb. 9 that gross individual annuities sales rose to $6.1 billion in the fourth quarter from $4.8 billion a year earlier. New York-based MetLife, the largest U.S. life insurer, posted a 38% increase in variable annuity sales to $5.1 billion.
Sales of equity-linked variable annuities have increased as stock markets rebounded from March 2009 lows, cutting the risk companies will take losses on customers' guaranteed returns. The Standard & Poor's 500 Index surged 23% in 2009 and 13% in 2010.
"The public companies in the variable annuities business had very strong sales," Steven Schwartz, an analyst with Raymond James & Associates Inc., said in an interview. "The equity markets are strong. That helps variable annuity sales." He rates MetLife "market perform" and Prudential "outperform."
Sales may increase further as investors regain confidence, said Robert Sollmann, executive vice president of retirement products at MetLife.
"The industry is poised for growth," he said at a conference in Miami on Feb. 11. "As people become more confident about putting their money back into the stock market, the VA industry, and certain companies in particular, are incredibly well positioned to capture a potentially very large share of those flows."
Insurers lost money on the products in 2008 and 2009 because the funds backing them are generally invested in stocks. The S&P 500 declined 38% in 2008.
Major sellers of variable annuities, including MetLife, Prudential and Lincoln National Corp. may have increased sales as representatives advertised the products to investors before terms changed, said Schwartz.
MetLife is reducing the guaranteed payout rates for its main variable annuity product to control risk, according to Sollmann. Prudential made a "modest price increase," Stephen Pelletier, president of Prudential's U.S. annuities business, said in an interview on Jan. 24.