Executives at American Financial Group — the parent of Great American Life Insurance Company — say they’re pleased with how the company’s annuity business performed in the third quarter.
Core operating earnings at the annuity unit were higher in the the latest quarter than they were in the year-earlier quarter, in spite of the effects of the COVID-19 pandemic, according to Craig Lindner, American Financial Group’s co-chief executive officer.
The annuity unit’s strong core operating earnings “demonstrate the strong fundamentals of our business,” Lindner said Wednesday, in a comment included in the company’s earnings announcement for the third quarter, which ended Sept. 30.
Both gross annuity premiums and new annuity sales were lower in the latest quarter than in the year-earlier quarter, but annuity sales were 25% higher in the third quarter than in the second quarter, Lindner said.
Annuity sales through financial institutions in September were higher than annuity sales through financial institutions in September 2019, Lindner said.
The annuity unit is holding on to a higher percentage of its customers than in the past, and the increase in persistency has helped the annuity unit increase average assets and reserves by about 5% to 7% this year, Lindner said.
American Financial Group (NYSE:AFG)
American Financial Group is reporting $164 million in net income for the third quarter on $2.1 billion in revenue, up from $143 million in net income on $2.1 billion in revenue for the third quarter of 2018.
The company gets about two-thirds of its gross written premiums from selling property and casualty insurance.
The company’s annuity unit is reporting $121 million in pre-tax core operating income on $453 million in revenue, compared with $100 million in pre-tax core operating income on $452 million in revenue for the year-earlier quarter.
Here’s what happened to premiums at the annuity unit, which American Financial Group calls its annuity segment, between the third quarter of 2019 and the latest quarter.
- Total Gross Annuity Premiums: $871 million (down from $1.2 billion)
- Gross Retail Annuity Premiums: $151 million (down from $228 million)
- Gross Financial Institution Annuity Premiums: $473 million (down from $627 million)
The annuity unit is reporting a net, after-tax loss of $34 million for the third quarter, mainly because of a $36 million charge related to the “unlocking” of, or changes in, the actuarial assumptions used to run the annuity business.
The main driver of the $36 million unlocking charge was an American Financial Group move to cut its expectation that the 10-year U.S. Treasury rate will increase to 2.75% within the next decade, from less than 1% today. The company had been assuming that the 10-year Treasury rate would increase to 3.5% within a decade.
Ameriprise Financial (NYSE:AMP)
Ameriprise is reporting a $140 million net loss for the third quarter on $3 billion in revenue, compared with $543 million in net income on $3.3 billion in revenue for the third quarter of 2019.
Adjusted operating earnings, which exclude the effects of “mark-to-market” type rules, fell to $184 million, from $554 million.
The retirement and protection unit, which sells annuities, life insurance and related products, is reporting an $89 million pre-tax adjusted operating loss on $781 million in net revenue, compared with $165 million in operating earnings on $788 million in net revenue for the year-earlier quarter.
The unit’s results include a $295 million charge related to changes in product assumptions, compared with a $16 million assumption unlocking charge for the third quarter of 2019. Most of the unlocking charge was the result of changes in interest rate assumptions, Ameriprise says.
Here’s what happened to cash sales of three types of protection products between the third quarter of 2019 and the latest quarter:
- Variable Universal Life and Universal Life: $49 million (down from $71 million)
- Term and Whole Life: $2 million (flat)
- Disability Insurance: $1 million (flat)
Sales of annuities increased 2%, to $1.1 billion.