Several life insurers saw massive year-over-year increases in both group and individual annuity considerations in the third quarter as fast-rising interest rates proved a beneficial tailwind for the segments — resulting in a record amount of business volume.
Impacts of a blockbuster deal
Among the 10 companies with the largest total considerations for the quarter, MetLife, Inc. and Prudential Financial Inc. booked the largest year-over-year increases in total annuity considerations. MetLife saw growth of 507.8% year over year, while Prudential grew 49.5%.
The two insurers were involved in the second-largest U.S. pension risk transfer deal on record, which took place earlier this year and greatly contributed to the high amount of total growth.
In September, subsidiaries of Prudential and MetLife issued nonparticipating single-premium group annuity contracts in a combined amount of $16 billion of pension obligations related to an enormous International Business Machines Corp. pension risk-transfer buyout transaction. The contracts will cover approximately 100,000 IBM participants and beneficiaries of the plan.
The pension risk-transfer space was particularly active in 2022 and is expected to continue its momentum into 2023.
Record growth
Third-quarter individual annuity considerations increased 22.4% to $72.45 billion from $59.19 billion in the third quarter of 2021, breaking the record set in the prior quarter.
In the individual annuity space, Athene Holding Ltd. landed the title of largest U.S. annuity writer for the third quarter. The insurer had $6.23 billion in individual annuity considerations for the period, representing a 156.1% increase from $2.43 billion in the third quarter of 2021.
An equity market downturn and rising interest rates have caused consumers to seek out protection-focused products. Fixed-rate deferred and fixed indexed annuity products reached record sales level during the third quarter, while registered index-linked annuities, or RILA, products were up 13% year over year, according to survey data collected by LIMRA. Meanwhile, traditional variable annuity sales were down 37% in the quarter.
Prudential noted in its third-quarter earnings call that product pivots resulted in sustained strong sales of more "simplified solutions," as the insurer saw $1 billion in third-quarter sales from its RILA product alongside increased fixed annuity sales.
Prudential's individual considerations were up 790.3% year over year with $1.40 billion in the third quarter compared to $157.3 million in the year-ago period.
Third-quarter group annuity considerations also increased 7.4% year over year to $49.71 billion from $46.28 billion.
Fidelity & Guaranty Life, a subsidiary of Fidelity National Financial Inc., reported the largest year-over-year increase in group annuity considerations with $605 million in the quarter, reflecting an increase of over 3 million percent from just roughly $19,000 in group annuity considerations in the third quarter of 2021.
The company is a newer entrant into the pension risk-transfer space and closed two deals in August representing $620 million in transferred pension obligations.
