Prudential Financial is discontinuing all sales of variable annuities with guaranteed living benefits, chairman and CEO Charlie Lowrey said today.
That means eliminating the Highest Daily Income and Prudential Defined Income annuity products. The move is needed as the insurer recalibrates amid economic uncertainty and ultra-low interest rates, Lowrey said.
"In terms of changing the focus within the business, we're on a path to de-risking, and have made major pivots to less interest-rate sensitive and more capitalized solutions in our individual annuities and in our life business," Lowrey explained.
"Specifically, you've seen us pivot away from VAs with lifetime income guarantees to less market-sensitive products," Lowrey said. "At the same time, you've seen us, in our life business, pivot to simpler, nonguaranteed products."
The insurer is committed to its FlexGuard annuity rolled out in late May, Lowrey said. Prudential's first indexed variable annuity product, FlexGuard is designed to provide customers with downside protection and the opportunity to grow and accelerate the performance of their retirement assets into the future.
"Following an accelerated launch to market in the second quarter FlexGuard continues to gain momentum, accounting for 38% of our annuity sales in quarter," Lowrey said.
Prudential reported a strong quarter based on efforts to get leaner, while assets under management increased 8.5% to $1.65 trillion. Annuity sales were up slightly from the second quarter but well off 3Q 2019 figures.
Prudential continues to make adjustments to its life insurance business as well. The insurer is repricing products to mitigate the impact of low rates, Vice Chairman Rob Falzon said. In addition, Prudential suspended sales of its single life guaranteed universal life product in July.
"As a result of these actions, we expect individual annuities and individual life sales to continue to move lower in the near term," Falzon said.
Prudential reported a third-quarter profit of $1.49 billion in the quarter ended Sept. 30, up 5% from $1.42 billion the same quarter last year.
The insurer is sharply focused on slashing costs to counter the COVID-19 pandemic impact on business, executives said. Prudential has already cut $135 million this year out of its $140 million goal. Lowrey described additional plans to slash another $250 million by the end of 2023 for a total of $750 million in cuts.
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.