U.S. life insurers, a group led by MetLife Inc. and Prudential Financial Inc., slipped to a loss in the second quarter as the stock-market retreat prompted sellers of equity-linked retirement products to boost reserves.
The industry recorded a net loss of $900.3 million, compared with net income of $8.9 billion in the same period a year earlier, research firm SNL Financial said today in an e- mailed statement.
The Standard & Poor’s 500 Index dropped 12 percent in the three months ended June 30, its first decline in five quarters. Insurers that sell variable annuities often promise to shoulder a portion of investment losses for clients. When stocks fall, carriers add to funds backing these guarantees.
“Reserve strengthening significantly affected performance in the second quarter, especially at many of the largest annuity writers,” Jon Wright, SNL’s director of insurance, said in the statement.
SNL’s study was based on so-called statutory insurance data. Statutory accounting is used by state regulators to monitor insurer solvency and differs from the standards required by the Securities and Exchange Commission, using generally accepted accounting principles.
Prudential and New York-based MetLife are the top two sellers of variable annuities in the U.S., according to trade group Limra International. Both companies reported second- quarter profits, under GAAP rules.
Prudential, based in Newark, New Jersey, lost 11 percent in the second quarter and MetLife fell 12 percent in New York Stock Exchange composite training.
To contact the reporter on this story: Andrew Frye in New York at afrye@bloomberg.net
To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net
This details the complexity of managing variable annuity portfolios for the insurance company--and should remind investors of the real value of index annuity writers, fixed annuity writers and variable annuity writers. These products absorb investment risk from policy-holders and greatly aid Americans seeking shelter from the retirement crisis through annuity private pensions. Wade Dokken
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