Yeah, It's Cold Out There: More Life and Annuity Issuers to Wall Street

Three more big individual life and annuity issuers — Prudential Financial Inc., Athene Holding Ltd. and Brighthouse Financial Inc. — have released their third-quarter earnings this week.

All three made money during the quarter, but all three are emphasizing that falling interest rates have forced them to put on their financial snow boots.

(Related: Life and Annuity Issuers Tell Wall Street About Interest Rate Winter)

Charles Lowrey, the chief executive officer of Prudential, said in a statement that Prudential continues to work to meet the evolving needs of its customers “while continuing to take a disciplined approach to pricing in consideration of the effects on profitability from the low interest rate environment.”

Athene said its earnings reflect “unfavorable unlocking” of assumptions, “driven by a reduction in the long-term interest rate assumption, partially offset by a favorable impact from actuarial experience.”

The Pembroke, Bermuda-based company said its new deposit total was lower in the latest quarter than in the third quarter of 2018 because of “Athene’s disciplined apporach to pricing in a declining interest rate environment.”

Brighthouse — the Charlotte, North Carolina-based company that holds the individual life and annuity businesses built by MetLife Inc. — said it cut its long-term mean reversion interest rate assumption to 3.75%, from 4.25%.

The Earnings

Prudential Financial Inc., Newark, New Jersey (Stock symbol: PRU)

Prudential is reporting $1.4 billion in net income for the third quarter on $13 billion in revenue, compared with $1.7 billion in net income on $14 billion for the third quarter of 2018.

The company’s U.S. individual solutions division, which is part of the U.S. financial wellness businesses, is reporting $518 million in adjusted operating income before taxes for the latest quarter on $2.8 billion in revenue, compared with $624 million in operating income on $2.7 billion in revenue for the year-earlier quarter.

Here’s what happened to performance indicators for some life and annuity products in the third quarter, and how that compares with performance in the year-earlier quarter:

• Variable Annuity Sales: $2.3 billion (up from $2.1 billion)
• Variable Annuity Net Flows of Cash: Negative $1.3 billion (changed from negative $1.2 billion)
• Fixed Annuity Sales: $319 million (up from $128 million)
• Fixed Annuity Net Flows: $202 million (up from $20 million)
• Total Annuity Sales Through Insurance Agents: $724 million (up from $640 million)
• Total Annuity Sales Through Independent Financial Planners: $1.3 billion (up from $999 million)
• Term Life Sales: $49 million (down from $55 million)
• Guaranteed Universal Life Sales: $24 million (up from $23 million)
• Other Universal Life Sales:  $35 million (down from $44 million)
• Variable Life Sales: $67 million (up from $41 million)

Athene Holding Ltd., Pembroke, Bermuda (Stock symbol: ATH)

Athene is reporting $293 million in net income for the third quarter on $4.5 billion in revenue, compared with $623 million in net income on $2.6 billion in revenue for the third quarter of 2018.

Retail deposits fell to $1.9 billion, from $2.2 billion.

Brighthouse Financial Inc., Charlotte, North Carolina (Stock symbol: BHF)

Brighthouse is reporting $685 million in net income for the third quarter on $3.2 billion in revenue, compared with a $269 million net loss on $1.4 billion in revenue for the third quarter of 2018.

The year-earlier quarter revenue was much lower due to $691 million in net losses.

Revenue excluding the effects of investment value changes and derivatives program value changes fell to $2.1 billion, from $2.2 billion.

Here’s what happened to some key sales indicators between the third quarter of 2018 and the latest quarter:

• Total Annuity Sales: $1.8 billion (up from $1.5 billion)
• Shield Annuity Sales: $1.1 billion (up from $867 million)
• Life Insurance Sales: Held steady at $2 million

— Read Principal Adjusts for Falling Treasury Rates, on ThinkAdvisor.

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