Equitable Holdings made a $12 billion reinsurance deal with Venerable, and that has given securities analysts something new to discuss with insurance company executives who have been holding conference calls to go over earnings for the third quarter.
The insurers have posted recordings of the those calls on the investor relations sections of their websites.
Analysts asked about the effects of COVID-19 and low interest rates as well as whether the insurance companies could make the the same kind of deal as Equitable.
Tom Wilson, CEO of The Allstate Corp., is one of the executives who expressed some skepticism about the idea that making a deal like Equitable’s would be easy.
Wilson said Allstate is open to talking to asset managers and other companies that want to acquire big blocks of the annuity business, but only if an offer meets two objectives.
“One, you’ve got to take care of our customers,” Wilson said. “Some of these customers are going to get paid for 30-plus years. We don’t want to turn that responsibility over to somebody that’s going to take it all and go to Las Vegas and put it on red. And then our customers are left holding the bag. Secondly, we want to make sure it’s a good deal for our shareholders.”
Here are six other points insurance company executives have been saying about annuities:
1. Plenty of annuity blocks are worth keeping.
Gary Bhojwani, the CEO of CNO Financial Group, said that most of the transactions announced have been for older blocks of variable annuities or indexed annuities.
CNO’s own indexed annuities are newer, Bhojwani said.
“We didn’t have some of those product features that were added over the last decade or so, when there was really an arms race going on,” Bhojwani said.
2. Selling annuities can still be a great business.
Executives from Lincoln Financial said a well-run annuity business that uses good hedging programs still can deliver great results.
Randy Freitag, the head of Lincoln’s individual business, said the company’s annuity business has been reporting a return on assets ratio of about 0.8 percentage points for about as long as he can remember.
Dennis Glass, Lincoln’s CEO, said it has been making 18% to 20% return on equity with no blowups in that business for years.
“We think it’s a very good business for Lincoln,” Glass said.
3. Offering annuities with guarantees still can be a great business.
Bill Wheeler, the president of Athene Holding Ltd., told analysts that his company has been leading the market for sales of fixed indexed annuities.
“While industry fixed industry annuity sales have moderated significantly year-to-date, we remain well-positioned, with our numerous competitive advantages that are driving a much different result for us than others are experiencing.”
Daniel Pitcher, the CEO of FBL Financial, noted that his company recently introduced the Agility Fixed Indexed Annuity contract, which features a two-year point-to-point strategy and a six-year surrender charge period.
4. Money for deals is still out there.
Anna Manning, the CEO of Reinsurance Group of America, said the company is being cautious with use of its capital, because of the COVID-19 pandemic.
“But we are active at looking at transactions,” Manning said, in a response to a question about annuity block deals. “The attractive opportunities are something that we continue to pursue.”
5. The need for annuities is still there.
Andrew Sullivan, head of the U.S. businesses at Prudential Financial, said the company still likes being in the annuity market, even though it’s pulling back from offering living benefits guarantees.
“We are very, very good in the annuity space,” Sullivan said. “We believe there is still a need to help people with accumulation, and to help them with decumulation from a longevity insurance perspective.”
The size of that need and the strength of Prudential’s distribution force have helped sales of the company’s new buffered annuity, or variable indexed annuity, get off to a strong start, Sullivan said.
6. Prices might start to stabilize.
Glass said he believes that Lincoln has been a leader in life and annuity products, and that now the company’s competitive position has improved because other companies are following suit.
— Read Q3 Life, Health and Annuity Earnings Season Calendar, on ThinkAdvisor.