Rollercoaster-like Volatility Abounds in '10 Annuity Data: SNL Financial Details which U.S. Life Insurance Companies are Enjoying the Ride While Others Struggle

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SNL Financial’s data analysis is based on over 90% of the total market, providing the most comprehensive and accurate pulse for reporters covering the Life Insurance industry.

Top 30 writers of ordinary annuities in 2010 at the SNL life group level

Trends in annuity data reported in 2010 by U.S. life insurance companies reveal an industry that remains in transition in the aftermath of the global financial crisis.

The combination of first-year and single-premium annuity considerations as well as total annuity considerations declined modestly year over year on an industry wide basis, but an analysis of SNL's statutory insurance data finds tremendous volatility in the results reported by specific leading annuity writers.

INDUSTRY TRENDS:

  •     Total direct annuity considerations: Including first-year, single-premium and renewal business, total of $299.29 billion marked a 1.2% decline from 2009 levels. The 2010 result lagged the 2008 sum by 13.7%.
  •     Total direct ordinary individual annuity considerations: 2.6% decrease from 2009 levels to $189.71 billion in 2010.
  •     Total Group annuity considerations: $109.57 billion marked a 1.3% year-over-year increase, but that figure remains down 13.3% from 2008.
  •     Direct first-year and single-premium annuity considerations: Including collected, uncollected, deferred and accrued first-year premiums, considerations declined at faster rates; ordinary individual annuity considerations in those categories of $160.74 billion marked a 5.8% decline from 2009 and group annuity considerations dipped by 2.4%.
  •     Among the top 30 writers of ordinary individual annuities in 2010: At the SNL life group level, based on combined first-year and single premiums written on a direct basis, double-digit percentage changes in considerations were the rule. Considerations declined by 15% or more at 14 of the 30 groups, while they increased by 14% or more at nine of the 30 groups.

WHO’S RIDING HIGH?

  •     Prudential Financial Inc. life group saw the largest positive change. Its 2010 first-year and single-premium direct considerations of $16.13 billion marked a 135.7% jump on a year-over-year basis.

o    Pruco Life Insurance Co., alone, saw direct first-year premiums soar to $13.49 billion in 2010 from $3.45 billion in 2009. In the management discussion and analysis section of Pruco Life's annual statutory statement, the company cited the combination of the strength of its product offerings and a change in distribution strategies to focus on a new, single product line called Prudential Premier Retirement.

  •     MetLife Inc., Jackson National Life Insurance Co., Lincoln National Corp. and Allianz SE U.S. life groups saw their considerations rise in 2010 to varying degrees among the top writers of first-year and single-premium ordinary individual annuities from those reported in 2009.
  •     MetLife remained atop the list with first-year and single-premium considerations of $21.55 billion.

WHO’S STRUGGLING?

  •     New York Life Insurance Group reported a decline in 2010; thanks to a drop in considerations of 27.2% to $7.81 billion, the group fell to sixth in the 2010 rankings. New York Life Insurance & Annuity Corp. offered several explanations:

o    It limited sales of fixed deferred annuities during the year due to the prevailing interest rate environment
o    2009 results had been boosted to "higher than normal" levels as investors sought the relative safety of investment annuities over products exposed to market risks. New York Life's investment annuities incorporate fixed deferred, variable deferred, structured settlements and fixed period annuities.

  •     Hartford Financial Services Group Inc. life group reported direct first-year and single-premium annuity considerations of $1.91 billion in 2010, down from $4.03 billion in 2009, $9.84 billion in 2008 and $14.77 billion in 2007. Single premiums at Hartford Life & Annuity Insurance Co. fell to $1.19 billion in 2010 from $2.34 billion in 2009 — a level that had represented a low-water mark for the company dating back to 2000. Hartford Financial declines due to:

o    Lower sales of fixed annuities resulting from the low interest rate environment
o    Decision to shift its variable annuity product offerings away from capital constraining living benefit guarantees.
o    Liam McGee, The Hartford's chairman, president and CEO, conceded in November 2010 that sales of the company's "simpler, lower cost" annuity alternative had fallen short of expectations.

  •     Pacific Mutual Holding Co. group saw a 46.8% decline in 2010, attributed to lower annuity considerations to declining fixed annuity sales.
  •     ING Groep NV saw a 45% decline as unit ING USA Annuity and Life Insurance Co. reported that it had ceased new sales of variable annuities in March 2010 as part of a global risk-reduction plan.
  •     Massachusetts Mutual Life Insurance Co.'s first-year and single-premium considerations tumbled by 42.2% to $1.5 billion in 2010. The insurer saw lower fixed and variable annuity sales, partially offset by higher sales of single-premium immediate annuities. MassMutual said in its 2010 MD&A that it exited third-party distribution for most annuity products and reduced exposure to certain types of living-benefit guarantees on variable annuities beginning in 2009.

HIGHLIGHTS OF THE GROUP ANNUITIES SPACE:
Very volatile: Only four of the top 30 writers saw less than double-digit percentage changes in first-year and single-premium considerations.

ON THE FAST TRACK:

  •     American International Group Inc. At just under $2 billion, the AIG life group bounced back from dismal first-year group annuity considerations of $1.07 billion in 2009, but it remains well below its pre-crisis levels.
  •     SunAmerica Annuity & Life Assurance Co.’s first-year group annuity considerations soared to $1.11 billion in 2010 from just $453.4 million in 2009.

STRATEGIC DECLINES:

  •     MassMutual was one of 12 groups with double-digit percentage declines in 2010, though the company made it clear that it is not overly concerned about that status. It made a strategic shift in its defined benefit and contribution business toward registered product mutual fund options, which do not create statutory-basis premium.

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