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American International Group Inc. is reporting that its life and retirement unit did well in the fourth quarter, but that the return of falling rates was hard on sales.

The financial services giant is reporting $869 million in net income for the fourth quarter of 2019 on $12 billion in revenue, compared with a $560 million net loss on $13 billion in revenue for the fourth quarter of 2018.

The company’s life and retirement unit is reporting $839 million in adjusted pretax income on $4 billion in revenue, up from $623 million in adjusted pretax income on $4.1 billion in revenue for the year-earlier quarter.

But Kevin Hogan, the head of AIG’s life and retirement unit, said during a conference call AIG held to go over its results with securities analysts that AIG expects individual fixed annuity sales to continue to be down for 2020, and for cash to flow out of group and individual retirement products.

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Here’s what AIG said happened to net flows of cash for several individual retirement products, in the United States, between the fourth quarter of 2018 and the latest quarter:

  • Indexed annuities: A $1.1 billion inflow (down from a $1.2 billion inflow)
  • Variable annuities: A $456 million outflow (compared with a $528 million outflow)
  • Fixed annuities: A $658 million outflow (compared with $19 million inflow)

Brian Duperreault, AIG’s chief executive officer, said in a comment on the results included with the earnings release that the AIG life and retirement business “delivered solid results in the face of continued headwinds from low interest rates and tightening credit spreads.”

(Related: 5 Things Annuity Issuer Executives Are Saying Now)

Hogan said conditions for annuity sales looked good in the first quarter.

“We deployed significant capital in individual retirement and produced robust new business volume at attractive margins,” Hogan said. “As rates and spreads declined over the remaining three quarters, we adjusted our pricing and reduced individual annuity sales levels, as our view of margins became less attractive.”

But group retirement premiums and deposits and international life sales have been strong, Hogan said.

American Equity Investment Life Holding Company (NYSE AEL)

American Equity Life is reporting $220 million in net income for the fourth quarter of 2019 on $1.1 billion in revenue, compared with $54 million in net income on negative $451 million in revenue for the fourth quarter of 2018.

The negative revenue figure for the fourth quarter of 2018 was caused by a change in the fair value of the derivatives the West Des Moines, Iowa-based company uses to hedge annuities against stock market ups and downs.

American Equity gets more than 80% of its ordinary revenue from investment income. Net investment income increased to $588 million, from $554 million.

Overall annuity sales fell to $921 million, from $1.1  billion.

John Matovina, the company’s chief executive officer, said in a comment about the results that the drop in gross annuity sales was due to competitive rate dynamics in the market.

In October, American Equity responded to lower  yields on its own investments by cutting crediting rates and guaranteed income levels for holders of indexed annuities.

“The competition did not act in a similar manner, neither in terms of timing nor nature with regards to rates and guaranteed income,” Matovina said.

But investment yields started to look better in the fourth quarter, and American Equity increased caps and participation rates for holders of indexed annuities starting in mid-December. That meant the company would apply a bigger share of any investment index gains to the holders’ crediting rates.

The mid-December changes put American Equity in a better competitive position, but the company still has not increased guaranteed income levels, Matovina said.

“While in the near term this may be a sales head wind for us with respect to policies with lifetime income benefit riders, we expect competitors will ultimately adjust their guaranteed income pricing to recognize this factor,” Matovina said. “But the timing and size of any such adjustments is unclear at this time.”

CNO Financial Group Inc. (NYSE:CNO)

CNO is reporting $278 million in net income for the fourth quarter of 2019 on $1.1 billion in revenue, up from $28 million in net income on $778 million in revenue for the year-earlier quarter.

At one of the Carmel, Indiana-based company’s units, Bankers Life, first-year collected premiums for long-term care insurance (LTCI) increased to $5 million, from $4.3 million, and total collected LTCI premiums increased to $65 million from $64 million.

Bankers Life spending on commission expense and distribution fees increased to $18 million, from $13 million.

At Washington National, spending on commission expense and distribution fees rose to $21 million, from $19 million.

Here’s what happened to new annualized premiums for some products other than LTCI policies:

Bankers Life

  • Medicare supplement: $16.1 million (up from $15.8 million)
  • Life: Held steady at about $30 million
  • Annuity: $324 million (down from $354 million)

Washington National

  • Supplemental health and other health: $18 million (up from $17 million)
  • Life: $2.4 million (up from $1.7 million)

During the CNO earnings call, Paul McDonough, the chief financial officer, told analysts that the company’s LTCI business is performing as expected. “New business gains outpaced earned rate reductions,” McDonough said. “There were no material long-term care assumption changes, as experience continues to align very well with expectations.”

Gary Bhojwani, the chief executive officer, said that the number of producing agents is up 6%, and more first-year agents are staying on through the second and third year.

More of the agents are licensed to sell securities, and those agents’ ability to sell income planning products helps lead to deeper, more productive client relationships, Bhojwani said.

Like many of the other life insurer executives who have participated in earnings calls in the past few weeks, Bhojwani emphasized the need for discipline in connection with annuity sales in the face of lower interest rates, and lower yields on the investments that support life and annuity products.

“As a result of our pricing discipline, we will accept lower sales when market conditions warrant, to ensure that we’re putting business on our books that meets our return thresholds,” Bhojwani said.

Primerica Inc. (NYSE:PRI)

Primerica is reporting $94 million in net income for the fourth quarter of 2019 on $532 million in revenue, up from $87 million in net income on $487 million in revenue for the fourth quarter of 2018.

The Duluth, Georgia-based company’s own commission and fee revenue increased to $188 million, from $172 million.

The company’s sales commission expense spending increased to $6.6 million, from $5.6 million.

Here are some of the distribution force performance numbers Primerica released, compared with how those indicators looked in the year-earlier quarter:

  • Life-licensed sales force: 130,522 (down from 130,736)
  • Recruits: 60,466 (up/down from 61,990)
  • Average number of policies sold per rep per month: Held steady at 0.18.

Here’s what happened to sales of certain types of products between the year-earlier quarter and the latest quarter:

  • Term life: 71,469 policies (down from 72,122 policies)
  • U.S. Retail Mutual funds: $832 million (down from $768 million)
  • Annuities: $660 million (up from $565 million)

During Primerica’s earnings call,  Glenn Williams, the chief executive officer, said the company has worked to increase sales by adding an insurance wholesaling team, to help agents with product and sales training.

CVS Health Corp. (NYSE:CVS)

CVS is reporting $1.7 billion in net income for the fourth quarter of 2019 on $67 billion in revenue, up from a $421 million net loss on $54 billion in revenue for the year-earlier quarter.

The Woonsocket, Rhode Island-based drug store company’s health care benefits unit, which now includes Aetna and some other operations, is reporting $386 million in operating income for the latest quarter on $17 billion in revenue, compared with $432 million in operating income on $6.2 billion in revenue for the year-earlier quarter.

CVS ended the quarter providing or administering coverage for 23 million people, up from 22 million a year earlier.

During the CVS earnings call, Karen Sue Lynch, president of the Aetna business unit, said the number of enrollees seeing doctors for flu was a little above normal, but that the level of severity has been lower, and that the company believes it has covered the flu claim costs adequately in reserves.

CVS executives talked repeatedly about efforts to set up  “HealthHUB” health care areas in about 650 stores by the end of the year, and in about 1,500 stores overall.

Between MinuteClinic walk-in clinics and the new HealthHUB areas, many CVS stores should be about to treat about 80% of what a primary care physician can treat, according to Larry Merlo, the CVS chief executive officer.

But many enrollees want a strong relationship with a traditional primary care physician, Merlo said.

CVS sees the HealthHUB centers as being more providers of health care “navigator” services, or care coordination services, than as replacements for traditional primary care, Merlo said.

Merlo said CVS is making room for the HealthHUB centers by reducing the amount of general merchandise the drug stores sell, and that the health beauty products still in the front of the stores tend to have higher profit margins than the general merchandise did.

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