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James Cracchiolo. (Photo: Ameriprise)

Life Health > Annuities > Variable Annuities

Ameriprise Sees 11% Increase in Advisor Productivity

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What You Need to Know

  • Ameriprise was the first U.S. life and annuity issuer to post second-quarter earnings.
  • The company has tried to cut insurance guarantee risk by focusing on other operations.
  • It now has about 10,200 advisors.

Ameriprise Financial says its move to sell financial services products from other companies is going well.

James Cracchiolo, the Minneapolis-based company’s CEO, noted Wednesday that the company has built up a force of 10,200 financial advisors, and that the average productivity of those advisors increased 11% between the second quarter of 2021 and the latest quarter, to $814,000 per advisor.

“We’re also seeing nice engagement with advisor recruits,” Cracchiolo told securities analysts on a conference call the company held to go over its second-quarter results, which were posted Tuesday.

The company added 99 highly productive advisors in the second quarter, and the advisor recruiting pipeline continues to look good, Cracchiolo said.

Ameriprise is a major writer of U.S. life and annuity products as well as an asset manager and investment advisory firm. It was the first major writer of U.S. life and annuity products to release its second-quarter earnings.

Cracchiolo described the company’s life and annuity business as “performing well in this environment,” but variable annuity sales fell 29%, to $1.2 billion, and life and disability insurance sales fell 23%, to $65 million, because of the company’s ongoing move away from life and annuity products that offer living benefits guarantees.

What It Means

In theory, rising interest rates should improve the supply of life and annuity products that offer strong benefits guarantees, because issuers will be able to support the products with investments in high-quality bonds that offer high, fixed interest rates.

But moving back toward expanding guarantees, rather than slashing them, may take issuers some time.

The Earnings

The second quarter ended June 30.

Despite geopolitical upheaval and stock market volatility, Ameriprise is reporting $756 million in net income for the quarter on $3.5 billion in revenue, up from $591 million in net income on $3.4 billion in revenue for the second quarter of 2021.

The distribution fees Ameriprise earned from selling other companies’ products increased 1%, to $458 million.

Pretax operating earnings fell 12% at the asset management business, to $222 million, but increased 16% at the Advice & Wealth Management unit, to $492 million.

The Retirement & Protection Solutions unit, which runs the company’s insurance operations, is reporting $179 million in pretax adjusted operating earnings on $760 million in revenue, compared with $182 million in operating earnings on $808 million in revenue for the year-earlier quarter.

Although sales of traditional variable annuities were down, sales of registered index-linked annuities, which Ameriprise calls structured variable annuities, increased 3%.

The Shift Away From Guarantees

Ameriprise and many competitors have reduced exposure to life and annuity guarantees in recent years because of concerns that low interest rates on bonds have been making efforts to use bond portfolios to support the guarantees unsustainable.

The Federal Reserve Board has pushed a key interest rate parameter it controls, the target for the federal funds rate, up a total of 2.25 percentage points since February, to a range of 2.25% to 2.5%.

In spite of that increase, many insurers are continuing to follow the same risk-reduction strategies they adopted when the federal funds rate target was lower.

Risk Transfer

Ameriprise would like to complete one or more deals that would help it shed some life, annuity and long-term care insurance risk.

On the conference call, Thomas Gallagher, an analyst from Evercore ISI, asked Walter Berman, Ameriprise’s chief financial officer, about the company’s effort to find attractive risk transfer deals.

“We certainly have interest,” Berman said. “I think it’s clear to us that the value and the quality of what we have is being recognized.  But, as you know, these are long-tailed evaluations, and they’re continuing.”

Pictured: James Cracchiolo. (Photo: Ameriprise)