Life insurers may be doing a good job of taking a disciplined approach toward guarantee risk, and shifting toward reliance on safer product structures — but, at some point, loss of annuity assets may hurt.
Securities analysts at Morgan Stanley point made that point in a recent comment on insurers’ second-quarter results.
The analysts see important positive trends, such as an easing of regulatory threats, and slow, steady increases in interest rates. Increases in rates help issuers generate more revenue from the bonds, mortgages and other investments that support their annuity products.
The analysts also see negative trends, including uncertainty about long-term care insurance obligations and pressure from Tax Cuts and Jobs Act provisions.
Another concern the analysts see is consumers pulling more cash out of variable annuities than they put in.
The strong stock market has helped push up the total value of variable annuity assets, and variable annuity unit earnings .
Variable annuity sales were somewhere around $8 billion, but outflows were around $12 billion,, according to an analyst chart.
Net outflows were around $4 billion, according to the analysts’ figures.