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Individual annuity premium declines drag down industry totals in Q2

Affiliates of Massachusetts Mutual Life Insurance Co. saw their direct annuities premiums and considerations surge year over year during the second quarter, but a majority of the biggest U.S. insurers saw such premiums fall.

As the country grappled with the onset of the COVID-19 pandemic in the second quarter, 10 of the largest annuities writers reported double-digit decreases compared to a year ago. Only four groups the affiliates of MassMutual, New York Life Insurance Co., Teachers Insurance & Annuity Association of America and Voya Financial Inc. experienced gains during the same time.

Of those largest annuity writers, MassMutual recorded the largest year-over-year growth as considerations swelled by 47%. Individual considerations jumped to $2.80 billion, compared to $1.26 billion in the second quarter of 2019. Direct group considerations rose by 7.5% to $2.58 billion.

New York Life experienced the biggest year-over-year increase within the group business line, posting a rise of nearly 94% to $1.93 billion. That growth helped push New York Life into second place for total annuity considerations during the quarter. Its total annuity considerations came in at $4.89 billion for the period.

TIAA's total annuity considerations rose to $4.19 billion, with $1.64 billion coming from the individual line and $2.55 billion in the group line.

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On the other end of the spectrum, American International Group Inc. and Prudential Financial Inc. saw annuity considerations shrink by more than 40% each.

Kevin Hogan, AIG executive vice president and CEO of life and retirement, during an Aug. 4 conference call said the insurer experienced a significant drop in retail annuities sales during the quarter, but there were "early indications" sales would pick up. He said the insurer saw a rebound in July sales, compared to June and maintained that the "new business pipeline continues to build."

Compared to its other lines, AIG's fixed annuity business logged the largest year-over-year decrease as premiums declined almost 73% to $400 million from approximately $1.5 billion. Its index and variable annuity premiums were down roughly 46% and 29%, respectively.

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In aggregate, the U.S. life industry recorded total annuity considerations of $77.34 billion in the second quarter, a decline of 14.9% from a year earlier. This was primarily driven by a 20.4% decrease in individual considerations, which recorded their lowest quarterly total since the fourth quarter of 2017.

Individual annuities refer to fixed and variable annuities and is reported as ordinary within NAIC statutory statements. Group annuities include investment options typically available in tax-advantaged savings accounts and guaranteed investment contracts.

S&P Global Market Intelligence uses statutory total annuity premiums and considerations to determine market share. Total annuity consideration is a preferred indicator of market share as it not only reflects new business but also the persistence of a company's existing business in the form of renewal annuity considerations. Additionally, many policyholder acquisition costs are not recovered within one year. As such, total annuity premiums and considerations can also be a better indicator of profitability for life insurers, whereas new sales do not necessarily equate with profitability