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5 New Things a Top Analyst Is Seeing in the Annuity Market Now

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Keefe, Bruette & Woods recently tried to pull insurance investors out of the COVID-19 work-at-home fog by holding a virtual insurance conference.

The investment bank — which has its headquarters in the old Equitable Building in Midtown Manhattan — brought executives from 14 big, publicly traded life insurers in to talk about what they’re doing and seeing now.

Ryan Krueger, a KBW analyst, found some comments that anyone watching the annuity market might expect.

“Low interest rates, social distancing, and weak economic conditions are still causing headwinds for many products,” Krueger said.


Krueger also found potentially spooky gaps in what life insurer executives were talking about: Few of the conference participants said much about interest rates. And “there wasn’t a lot of specific commentaries by companies ahead of [second half of the year] actuarial assumptions reviews.”

The speakers did talk about some new things. Here’s a look at five of those new things, drawn from Krueger’s conference report.

1. Sales are doing better.

Although outside forces are causing new business headwinds, “companies commented that conditions are gradually improving and persistency has largely held up (and in some cases improved),” Krueger writes.

2. Athene is out here absorbing fixed annuity risk.

Athene is known for acquiring jumbo blocks of business, but it said it’s now working on a lot of deals for blocks of business in the $1 billion to $2 billion asset range.

For retail agents, annuity reinsurance deals might not mean anything. In some cases, however, they could lead to administrative changes, and the administrative changes could lead to the annuity holders seeking advice from financial professionals.

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3. Equitable wants to reinsure its variable annuity guaranteed minimum income benefit block.

The block has plenty of reserves, and good cash flow, but investor fear of guarantee risk hurts Equitable’s stock price, according to Krueger’s summary of an Equitable’ executive’s remarks.

Equitable wants to find a high-quality reinsurer to reinsure the block, Krueger says.

4. Prudential managers face a strange new obstacle to completing mergers and acquisitions.

A Prudential executive said one issue is that Prudential believes its stock is a great buy right now.

“The company stated that there’s a high hurdle to any material M&A at this point relative to buying back its own stock.”

5. Prudential has a big block of variable annuity business that it would like to reinsure.

Prudential wants to a reinsure a $107 billion block of variable annuity business, because Prudential “believes the market is overly discounting its valuation due to variable annuity exposure, and has concluded that transparency probably won’t solve this,” according to Krueger.

Prudential says it’s looking for a deal that will be good for shareholders, Krueger says.

— Read COVID-19 Might Have Caused $2 Billion in U.S. Life Claims So Faron ThinkAdvisor.

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