In a difficult year of annuity sales, Brighthouse Financial had its best annuity sales quarter since it became a public company.
Third-quarter annuity sales increased 29% and life sales increased 63% compared with the third quarter of 2019.
Fixed annuities had a particularly strong quarter year over year, with $945 million in sales in the third quarter, up from $358 million in the third quarter of 2019. That gain offset a drop in the variable segment, with $1.39 billion in 3Q, down from $1.45 billion last year.
Variable and Shield Annuities
Shield Level Annuities: $934 million, an increase from $905 million in the previous quarter, but down from $1.13 billion in the third quarter of 2019.
GMWB/GMAB: $350 million, up from $277 million in the previous quarter, and up from $223 million in 3Q 2019.
GMDB only: $87 million, up from $82 million in 2Q, and up from $72 million last year.
GMIB: $19 million, down from $22 million in 2Q, but up from $18 million last year.
Fixed indexed annuities: $234 million, down from $309 million in the previous quarter, and down from $751 million in the third quarter of 2019.
Fixed deferred annuities: $709 million, up from $239 million in 2Q, and up from $55 million last year.
Single premium immediate annuities: $1 million, down from $4 million in 2Q, and down from $5 million last year.
Other fixed annuities: $1 million, up from less than $1 million in 2Q, and down from $2 million last year.
“Fixed products are core to our strategy, both fixed index and fixed deferred annuities alongside our VAs [variable annuities] and our buffered annuities,” Conor Murphy, chief operating officer, said in Brighthouse's quarterly call today. “From an industry perspective, LIMRA is reporting a 47% increase year over year. We do offer a suite of competitive products. And specifically with a fixed rate annuity, we’re entered that space with a lower expense base.”
The company attributed the increase to an customer demand and Brighthouse’s focus on a “few select firms,” said Myles J. Lambert, executive vice president and chief distribution and marketing officer.
“The sales teams have pivoted quite well in this environment, and continue to support our advisors to the best of their ability,” Lambert said.
$3 Billion Net Income Loss
Despite the increase in sales, Brighthouse did report a net income loss of $3 billion in the quarter, which the company attributed primarily to “the impact from the company's annual actuarial review and net derivative mark-to market losses.”
Edward Spehar, chief financial officer, said part of the review was an examination of long-term assumptions, including capital markets and interest rates. There was an impact on statutory and GAAP results as a result, but “in different directions.”
“The statutory impact was a benefit of approximately 40 points on our risk-based capital ratio,” Spehar said. “We have continued to refine our models and assumptions to better align with variable annuity or VA reform, which we adopted at the end of 2019.”
In that process, the company found that it had been more conservative than it need to be, especially on invested assets supporting VAs, Spehar said.
“On a GAAP basis," he said, "the total net income impact was a $2.2 billion charge with $1.7 billion driven by a reduction in the assumed GAAP long-term mean reversion rate for the 10-year treasury from 3.75% to 3.0%."
Steven A. Morelli is editor-in-chief for InsuranceNewsNet. He has more than 25 years of experience as a reporter and editor for newspapers and magazines. He was also vice president of communications for an insurance agents’ association. Steve can be reached at [email protected].
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