Here are the 5 biggest issuers of U.S. individual annuities, based on LIMRA Secure Retirement Institute Q1 survey data...

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5. Allianz Life Insurance Company of North America

Q1 Sales: $2.8 billion

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4. Lincoln Financial

Q1 Sales: $3.6 billion

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3. Jackson

Q1 Sales: $3.8 billion

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2. New York Life

Q1 Sales: $3.9 billion

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1. AIG

Q1 Sales: $5.3 billion

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The newly renamed Globe Life Inc. (which was previously known as Torchmark) is preparing to kick off the earnings release season for U.S. life insurers Oct. 22.

Principal Financial Group Inc. will start the earnings release season for the top annuity issuers Oct. 23.

For any insurers with much life insurance, annuity, or long-term care insurance or long-term disability insurance on their books, the dominant questions will be: How do you feel? Which ambulance providers are in your network? Do you think some Dramamine would help?

(Related: Why Global Bond Yields Are Negative)

Securities analysts from Morgan Stanley, Keefe, Bruyette & Woods and Wells Fargo Securities recently came out with third-quarter life insurance earnings previews. The analysts focused heavily on the monster that has awakened and started throwing life and annuity issuers’ chief financial officers around: falling interest rates.

Typical rates on 10-year Treasuries are now in the 1.5% to 1.75% range, and the yields life insurers are getting on money newly invested in bonds may be in the 3.25% to 3.5% range, according to Ryan Krueger and Peter Xuan of Keefe Bruyette & Woods.

The current “new money rates” are about 1 percentage point below life insurers’ overall portfolio yields.

Rates have been low for about a decade, but, in recent years, they had been creeping up.

Now, they’re plummeting. Low rates tend to be good for stock prices, but they clobber the yields life and annuity issuers get on the reserves backing products that are designed to stay in place for many years, or to pay benefits over periods of many years.

Securities analysts’ views may have a direct effect on what big, publicly traded life insurers sell, and what they charge.

Analysts’ views have less of a direct, immediate effect on policyholder-owned mutuals and other privately held insurers, but non-public life insurers eventually succumb to the same pressures that squeeze publicly traded life insurers. Non-public life insurers may not have to worry as much about turning a big profit every quarter, but they do have to worry about not losing large amounts of money every quarter.

Here are three things analysts are saying about the low-rate monster.

1. Low rates are a really big deal.

Elyse Greenpan and colleagues at Wells Fargo suggested in the title for their earnings preview that, for life and annuity issuers, “pricing & rates are all that matter.”

Nigel Dally and Bob Huang, analysts at Morgan Stanley, have warned, “Sharply lower interest rates and equity market appreciation below normal levels is leading us to trim estimates.”

2. Annuity issuers may get credit for being good interest rate forecasters and managers.

Analysts note that life insurers generally are out of favor with investors, in part because of concerns about interest rates.

But they say investors’ low expectations may leave room for some issuers to startle investors with pleasant earnings surprises.

The Morgan Stanley analysts say of AXA Equitable, for example, that the investment thesis for that company “revolves around its ability to deliver moderate earnings growth and expand its return on equity while appropriately managing the risks associated with its substantial variable annuity exposure.”

AXA Equitable has an insurance arm and the AllianceBernstein money management arm.

The insurance arm is so unpopular with investors that the insurance component of the stock price is equal to just 3.3 times projected 2020 earnings, according to the Morgan Stanley analysts.

Typical companies have stock prices equal to about 10 times projected earnings or higher.

3. Low rates could hurt sales.

The Keefe Bruyette & Woods analysts say they “expect some near-term pressure on fixed annuity sales.”

— Read Life and Health Stock Prices Drop With Rest of Marketon ThinkAdvisor.

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