Ameriprise Financial Inc. is responding to falling interest rates by putting more emphasis on sales of annuities without return guarantees.
Executives from the Minneapolis-based company talked about the company’s annuity product strategy Thursday, during a conference call with securities analysts.
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Ameriprise is reporting $463 million in net income for the fourth quarter of 2019 on $3.3 billion in revenue, compared with $539 million in net income on $3.2 billion in revenue for the fourth quarter of 2018.
Here’s what happened at the annuity unit and to the protection unit, which sells life insurance and related products.
Adjusted operating revenue: $618 million (up from $613 million)
Pre-tax adjusted operating earnings: $120 million (up from $119 million)
Adjusted operating revenue: $261 million (up from $260 million)
Pre-tax adjusted operating earnings: $65 million (down from $67 million)
The Conference Call
James Cracchiolo, the Ameriprise chief executive officer, said during the call that the company’s annuity books of business generate significant, consistent free cash flow.
He noted that fixed annuity sales were down, year-over-year, in line with the company’s plans, but that sales of variable annuities were up.
The company has also launched a structured annuity, which gives the holder some protection against poor investment index performance but does not provide an income guarantee.
“We expect this will help shift even more of our books away from products will guarantees,” Cracchiolo said.
Similarly, in the life insurance market, Ameriprise is focusing on sales of variable universal life insurance, rather than indexed universal life insurance, Cracchiolo said.
Walter Berman, the company’s chief financial officer, said that the company is shifting away from emphasizing living benefits features, and that the company’s exposure to variable annuity risk continues to be among the lowest in the industry.
— Read Q4 Earnings Vortex Report: Great American, Ameriprise, Principal, on ThinkAdvisor.