Venerable Agrees to Reinsure $12B Equitable Holdings Annuity Block

Equitable Holdings said Tuesday that it has arranged for Venerable Holdings to reinsure about 114,000 variable annuities that were sold from 2006 through 2008.

The annuities are backed by about $12 billion in general account assets and are associated with about $14 billion in separate account value, according to Equitable Holdings. The block involved amounts to about 13% of the company’s total in-force variable annuity business.

Resources

A copy of reinsurance deal announcement is available here.
A deal presentation and web briefing recording are available here.
An article about Equitable’s results for the second quarter is available here.

An Equitable subsidiary, Equitable Financial Life Insurance Co., would continue to administer the annuity contracts.

The Equitable Holdings board has approved the deal, the firm said.

To complete the deal, the company must get approvals from regulators. Equitable Holdings said it expects to close on the reinsurance arrangement by June 30, 2021.

The Companies

Equitable Holdings is the New York-based parent of Equitable, the life insurance company, and AllianceBernstein, a large asset manager. Equitable Holdings uses the name “Equitable Holdings” to refer to the top-level parent company and the name “Equitable” to refer to the insurance business.

The Equitable insurance business and AllianceBernstein have about 5 million client relationships and $711 billion in assets under management.

Equitable Holdings (EQH) trades on the New York Stock Exchange. It has said it will report earnings Nov. 4.

Venerable is a privately held company that was created by an investor group. The company has headquarters in West Chester, Pennsylvania, and other operations in Des Moines, Iowa.

Apollo Global Management, Crestview Partners, Reverence Capital Partners and Athene Holdings are some of the companies in the investor group that controls Venerable.

Venerable may be best known for working with Athene to acquire $19 billion in fixed and indexed annuity liabilities from Voya Financial through a reinsurance arrangement. That deal was announced in December 2017 and closed in June 2018.

Equitable Holdings sees Venerable as “a highly credible partner with an aligned risk management philosophy and expertise in managing and hedging complex variable annuities,” Equitable Holdings said.

The Annuity Block

The block is made up of annuities issued outside of New York. The contracts contain guaranteed minimum income benefit guarantees, guaranteed minimum death benefit guarantees, or both, with the guaranteed rates ranging from 6% to 6.5%.

In addition to accounting for 13% of Equitable Holdings’ in-force variable annuity business, the block accounts for much of the company’s exposure to variable annuity guarantee risk.

The Deal Mechanics

Equitable Holdings already owns a Delaware-based reinsurance company, Corporate Solutions Life Re.

Comments

Mark Pearson, the CEO of Equitable Holdings, called the reinsurance deal a “landmark transaction.”

“This transaction accelerates the unlocking of economic value and allows us to return capital to shareholders,” Pearson said in his company’s deal announcement.

David Marcinek, Venerable’s chairman, said in a separate announcement that the Equitable Holdings deal shows Venerable is establishing itself as the partner of choice in the variable annuity reinsurance market.

“As we work to close this transaction, our team remains focused on building on this momentum and capitalizing on opportunities for further growth,” Marcinek said.