MetLife Inc.'s retail variable annuity sales slumped nearly 40% in the second quarter versus the same time period in 2015, following a decision by Fidelity Investments earlier this year to
suspend sales of the insurer's VA products.
A drop of such proportion offers a glimpse into the sort of influence some powerhouse product distributors such as Fidelity can have on the market.
“They definitely drive the bus, certain distributors more than others,” said Tamiko Toland, managing director of retirement income consulting at Strategic Insight.
MetLife's retail variable annuity sales were down 39% year-over-year in the second quarter, “primarily due to the sales suspension by a major distributor this year,” John C. R. Hele, MetLife's executive vice president and chief financial officer, said during the firm's quarterly earnings conference call.
Spokesman Al Killeffer confirmed Fidelity is the distributor in question, but declined to say how much of the drop is attributable to their sales suspension.
MetLife was the
No. 8 seller of VAs in 2015, with more than $7 billion in total sales.
Fidelity put a halt to sales of the MetLife products — the Growth and Income Annuity and the Accumulation Annuity — in February, following the insurer's announcement the month prior that it was
planning a separation of its U.S. retail unit, which provides variable annuities.
At the time, a Fidelity spokesman indicated that the uncertainty over the potential sale, spinoff or initial public offering of the business led to its decision to suspend sales.
MetLife had
approximately $1.1 billion in VA sales in the second quarter, compared with $1.9 billion in the same quarter of 2015.
“Companies become very dependent on certain distribution relationships,” Ms. Toland said. “It makes them more vulnerable to decisions they make that may change the nature of the relationship.”
Fidelity's strong brand name among consumers means they consistently turn to the company's platform to shop for investment products, regardless of investment strategy, which is a reason the firm can drive so much in sales, according to Samantha Chow, senior life and annuities analyst at Aite Group.
“If their annuities are not out there with some of these big firms with a lot of traffic, that will hurt their sales, as you've seen,” Ms. Chow said.
Insurers have seen industry-wide variable annuity sales
slide over the past several years. Total first-quarter VA sales
plunged to their lowest level in 15 years, due mainly to market volatility eroding demand for equity-based products and a looming
Labor Department regulation governing investment advice in retirement accounts. Sales are expected to continue their downward trajectory as the regulation comes into effect starting next year.
MetLife initially decided to separate its domestic retail arm due to pressures created by the “too big to fail” label the insurer earned under the Dodd-Frank financial reform law. It was one of four non-bank financial institutions to earn the “systemically important financial institution” designation.
A federal judge
overturned that decision in March. The government is
appealing the district court's decision.
Despite shedding SIFI status, MetLife's chairman, president and chief executive, Steven Kandarian, said executives are “working diligently on the separation plan,” although it's still unclear what form separation of its U.S. retail unit will take.
Its ultimate timing and form will be determined by “a number of factors,” including the capital markets environment, Mr. Kandarian said. MetLife announced in July it was
rebranding the unit as Brighthouse Financial.
Fidelity spokeswoman Kimberly Reingold said the firm's temporary pause of the annuity sales is still in place.
“We will continue to monitor the situation and evaluate future actions as we receive additional information,” she said.
