Lincoln Execs Are Happy, and 4 More Life & Annuity Earnings Updates

The fourth quarter of 2018 may have been a rollercoaster, but executives at the individual life and annuity issuers that reported earnings in the past week seem to enjoy rollercoasters.

Dennis Glass, the president of Lincoln National Corp., which uses Lincoln Financial Group as its marketing name, was especially cheerful about the state of the market.

LIMRA is now predicting that the annuity market will grow this year, and Lincoln Financial is expecting to increase its share of that growing pie, Glass told securities analysts, during a conference call the company held to go over its earnings.

“I think annuities are going to continue to become more popular with savers, just because of the demographics,” Glass said. “That demographic bucket is growing quite big.”

Glass and executives from most of the other carriers, including American Equity Investment Life Holding Company, Brighthouse Financial Inc. and Prudential Financial Inc., said they were happy with how their companies’ investment hedging programs had performed during the fourth quarter.

Here are more things the companies said about their earnings, drawn from the companies earnings releases, earnings supplements, conference call slidedecks and analyst calls.

American Equity Investment Life Holding Company

American Equity is reporting $54 million in net income for the fourth quarter on negative $451 million in revenue, compared with $37 million in net income on $1.2 billion in revenue for the fourth quarter of 2017.

Revenue was negative because the fair value of derivatives used in hedging fell $1.1 billion, compared with a $662 million gain for the year-earlier quarter.

Indexed annuity deposits increased to $1.1 billion, from $945 million.
Deposits for multi-year fixed rate annuities fell to $13 million, from $37 million.
Deposits for single-premium immediate annuities (SPIAs) fell to $2.9 million, from $7.9 million.

Ron Grensteiner, the company’s president, said during the company’s analyst call that the company took in more deposits in spite of a challenging competitive environment, with some issuers increasing participation rates and income.

He described the climate in the bank and broker-dealer channels as “hypercompetitive.”

“I think continuing to tell our story, with that participation rate strategy, and more boots on the ground, are going to really be the keys to our success going forward,” Grensteiner said.

Brighthouse Financial Inc.

Brighthouse is reporting $1.4 billion in net income for the latest quarter on $4 billion in revenue, compared with $668 million in net income on $1.9 billion in revenue for the fourth quarter of 2017.

Results for the latest quarter include a $2 billion gain on derivatives, compared with a $413 million drop in the value of derivatives in the year-earlier quarter.

Annuity sales increased to $1.7 billion, from $1.3 billion, with the company’s Shield and fixed indexed annuities doing especially well. Brighthouse retails no fixed indexed annuities, but it has assumed responsibility for 90% of gross sales of MassMutual’s Index Horizon fixed indexed annuities through reinsurance agreements.

Life sales fell to $1 million, from $3 million.

Eric Steigerwalt, the president of Brighthouse, said during the company’s analyst call that the company is launching a new life policy with long-term care benefits features this week.

He noted that Brighthouse is letting assets flow out of a 10-year-old block of fixed annuities that has reached the end of its surrender period, in connection with an effort to shift toward more profitable, less capital-intensive business.

FBL Financial Group Inc.

FBL is reporting $6.5 billion in net income for the latest quarter on $159 million in revenue, compared with $104 million in net income on $185 million in revenue for the fourth quarter of 2017.

Lincoln National Corp.

Lincoln Financial is reporting $399 million in net income for the latest quarter on $4.5 billion in revenue, compared with $818 million in net income on $3.7 billion in revenue for the fourth quarter of 2017.

The annuity unit is reporting $258 million in operating income on $1.1 billion in operating revenue, compared with $265 million in operating income on $1.2 billion in operating revenue for the year-earlier quarter.

Deposits increased to $3.8 billion, from $2.8 billion.

The life insurance unit is reporting $175 million in operating income on $1.8 billion in operating revenue for the latest quarter, compared with $152 million in operating income on $1.7 billion in operating revenue for the year-earlier quarter.

The acquisition of the Liberty Mutual employee benefits unit helped push group protection revenue to $1.1 billion, from $554 million.

Prudential Financial Inc.

Prudential is reporting $849 million in net income for the latest quarter on $18 billion in revenue, compared with $3.9 billion in net income on $15 billion in revenue for the fourth quarter of 2017.

The U.S. individual annuity unit is reporting $445 million in adjusted operating income before income taxes on $1.2 billion in revenue, compared with $541 million in adjusted operating income on $1.3 billion in revenue for the year-earlier quarter.

The U.S. individual life unit is reporting a $26 million adjusted operating loss before income taxes on $1.5 billion in revenue, compared with $98 million in adjusted operating income on $1.5 billion in revenue for the year-earlier quarter.

Kenneth Tanji, the company’s chief financial officer, was an example of a CFO who was happy to talk to securities analysts about hedging.

“Our variable annuity living benefit hedge program gained $3 billion in value during the quarter, most of that in December, with a hedge effectiveness of 98%,” Tanji said.

A separate capital hedging program also did well, Tanji said.