MetLife Exiting Universal Life With Secondary Guarantees
June 3, 2013 by Fran Lysiak
Having already cut its sales force sharply, MetLife Inc. continues to revamp U.S. retail distribution, along with managing a new risk profile that includes an exit from universal life insurance with secondary guarantees.
“Adviser count is down,” Eric Steigerwalt, executive vice president and head of MetLife’s U.S. retail business, said in a transcript from a recent investor day.
Steigerwalt said that number has fallen to a bit over 5,000 from about 7,500 in February 2012. “…I think we’re just about hitting out our bottom. We’ll probably start growing from there.”
He said that productivity “is way up, and we are saving a lot of money, okay, because we’re not financing advisors who frankly were never going to make it in this business and we’re putting all of our resources into people who have demonstrated that they can do a great job for their clients and a great job for the company, as a matter of fact,” Steigerwalt said.
MetLife’s U.S. retail business is focused on saving money by repricing its stock-market-linked variable annuities, exiting the market for UL with secondary guarantees and launching a new whole life product portfolio, according to a Form 8-K MetLife filed on the investor day event. The company says it’s on track to achieve$150 million of net pre-tax expense savings by the end of 2014.
MetLife also is restructuring its agency footprint, going to about 60 from the approximately 85 agencies it had about 15 months ago, he said.
As for exiting the UL secondary guarantee market, Steigerwalt said, “We are placing our bets going forward on many products, whole life is one of them, and so we have officially exited that business.”
As part of its ongoing shift away from capital-intensive products, MetLife plans to reduce sales of variable annuities by 41% this year from 2012 levels.
On Dec. 2, the National Association of Insurance Commissioners narrowly approved the valuation manual containing a life insurance principles-based reserving methodology (Best’s News Service,Dec. 3, 2012).
A switch to principles-based reserving would dramatically change the U.S. life insurance industry but market watchers last year varied widely in their views of the impact on insurers. Experts offered several predictions on prices for UL products with secondary guarantees in the short and long term. Byron Udell, president and chief executive officer of AccuQuote, previously told Best’s News Service that this modification “is causing most carriers that play in the long-term guarantee space to scramble in reaction.” The combination of the new reserving and protracted low interest rates are “causing prices to rise.” Some carriers exited the market for certain products they feel will be too expensive to offer, he said (Best’s News Service, Dec. 3, 2012).
In 2011, MetLife’s (NYSE: MET) U.S. sales of variable annuities totaled $28.4 billion. In 2012, sales dropped to $17.7 billion and in 2013, MetLife projects between $10 billion and $11 billion in sales. The company is continuing to manage reduction of variable annuity sales and redesign the product portfolio, said John Hele, MetLife’s chief financial officer (Best’s News Service, May 22, 2013).
The company plans to reduce risk by lowering sales of traditional lifetime living benefits on variable annuities, and adding managed volatility funds to the in-force block, according to the filing. MetLife also is launching a new single premium deferred annuity — MetLife Shield Level Selector — which will offset the equity risk of variable annuities.
The U.S. retail business also is creating headquarters in Charlotte, N.C. and moving 500 positions in 2013 and 800 positions in 2014 and 2015. Earlier this year, MetLife said it was transferring 2,600 jobs from five Northeast states, and California, to two cities in North Carolina to cut costs while receiving a job grant from North Carolina. Best’s News Service, March 8, 2013).
Meanwhile, MetLife faces Federal Reserve supervision if named a non-bank systemically important financial institution, said Steven A. Kandarian, MetLife’s chairman, president and CEO, during the company’s first-quarter conference call (Best’s News Service, May 2, 2013).
Metropolitan Life Insurance Co. currently has a Best Financial Strength Rating of A+ (Superior).
At the close of May 31,MetLife Inc.’s stock was trading at$44.21 a share, down 0.29% from the previous close.
(By Fran Matso Lysiak, senior associate editor, BestWeek: fran.lysiak@ambest.com)
