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Ameriprise Execs Describe Ideal Annuity and LTCI Suitors

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Executives at Ameriprise Financial Inc. like the company’s variable annuity business and are not that interested in selling it, in spite of some securities analysts’ concerns about any company  having exposure to annuity guarantee obligations.

The executives are somewhat more interested in proposals for long-term care insurance (LTCI) block deals, but only if a suitor can show how it would protect Ameriprise against future problems.

Executives from the Minneapolis-based insurer gave their views on would-be unit buyers Wednesday, during a conference call with securities analysts.

One analyst noted that private equity firms have been out making deals for big blocks of annuity business and showing some interest in LTCI blocks. He asked the Ameriprise executives about the kinds of deals they might consider.

(Related: What a Big Annuity Issuer Sees Out There Now)

Walter Berman, the Ameriprise chief financial officer, acknowledged that buyers are out there.

“Obviously, we’ve gotten more inquiries,” he said.

But the variable annuity business is an excellent business that generates excellent returns, Berman said.

For Ameriprise to take an offer for the variable annuity business seriously, “it would have to be an offer that would create shareholder value,” Berman said.

For the LTCI unit, which has not sold new policies since 2002, “we are preparing for and certainly would entertain offers,” Berman said.

From the perspective of Ameriprise, an attractive offer for the LTCI unit would “give us a reasonable share of return,” considering the potential risks related to reinsurance, and the potential risks and opportunities that shifts in interest rates could create, Berman said.

“So, yes,” Berman said. “We’re prepared. But an offer has to meet certain hurdles for shareholder returns, and provide the right protections from a contingency standpoint.”

LTCI Operations

Berman said during the call that the company has not sold a new LTCI policy since 2002, and that the block of LTCI policies that’s left over is performing as expected.

Here’s how Berman described the company’s two blocks of LTCI policies:

Policies Sold From 1987 through 1997

Average policyholder attained age: 80

Average age of a policyholder on claim: 87

Percentage of the policyholders on claim: 8%

Policies Sold From 1997 through 2002

Average policyholder attained age: 75

Average age of a policyholder on claim: 84

Percentage of the policyholders on claim: 5%

Ameriprise has deep knowledge of how the policyholders behave, the block is shrinking because of the age of the insureds, and actual results have been very close to expectations, Berman said.

“I continue to believe that our long-term care business is adequately reserved and well-managed,” Berman said.


Jim Cracchiolo, the Ameriprise chief executive officer, said the company’s advisors and broad range of products and services help build deep client relationships.

Advisor productivity has increased 12% in the past year, to $599,000, he said.

The company added 76 advisors in the second quarter, he said.

The company is focusing on serving clients with $500,000 to $5 million in assets, and investors in that part of the market still want and need advice, Cracchiolo said.

“They’re looking for a firm that will help them feel confident about their financial future,” Cracchiolo said.

Ameriprise is trying to meet those investors’ needs by brining in highly productive people and keeping them affiliated with Ameriprise as long as possible, he said.

“We could go and bring in independents and merge other firms, like others are doing,” he said. “What we’re really looking for is strong, quality advisors that will run a good practice, deliver a strong value proposition, and serve their clients well.


Ameriprise held the conference call to go over its earnings for the second quarter.

The company is reporting $462 million in net income for the quarter on $3.2 billion in revenue, up from $393 million in net income on $3 billion in revenue for the second quarter of 2017.

The annuity division earned $129 million on $622 million in revenue, compared with $142 million in earnings on $627 million in revenue for the year-earlier quarter.

Spending on distribution increased to $113 million, from $107 million.

Spending on “amortization of deferred acquisition costs,” which reflects expenses such as spending on sales commissions, increased to $49 million, from $48 million.

New variable annuity deposits increased 16%, to $1.2 billion.

New fixed annuity deposits increased 36%, to $60 million.

Some annuity issuers are starting to talk more about their benefits guarantees. Ameriprise executives are still emphasizing their ability to sell annuities without benefits guarantees: They pointed out that about 30% of their new variable annuity cash sales came from products without living benefits guarantees.

LTCI Earnings

The Ameriprise LTCI unit posted a $5 million pretax adjusted operating loss for the latest quarter on $67 million in operating revenue, compared with a net loss of $3 million on $66 million in operating revenue for the year-earlier quarter.

LTCI revenue for the latest quarter included $27 million in premiums and $40 million in net investment income.

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