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Robin Raju. (Photo: Equitable)

Life Health > Annuities > Variable Annuities

Equitable Holdings Picks Global Atlantic to Reinsure $10B in Group Annuity Value

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What You Need to Know

  • New York state has adopted its own approach to regulating variable annuity reserve that some critics say is overly strict.
  • The agreement between Equitable and Holdings and Global Atlantic would increase reserves for group annuity contracts with guaranteed crediting rates of 3%.
  • In October 2020, Equitable announced a $12 billion variable annuity reinsurance deal with Venerable, which has ties to Apollo and Athene.

Equitable Holdings is working with Global Atlantic to meet tough new New York state variable annuity reserving requirements.

Equitable Holdings has agreed to use a Global Atlantic subsidiary to reinsure group variable annuities with a total of $10 billion in general account and separate account value.

The annuities were written by Equitable Holdings’ Equitable Financial Life Insurance Company subsidiary. The proposed deal should free up $1.1 billion in cash at Equitable Financial Life Insurance Company, and Equitable Financial will use that cash to increase its variable annuity reserves, according to Equitable Holdings.

Equitable Holdings hopes to complete the deal by the end of the year.

During a conference call earlier this month to go over second-quarter earnings with securities analysts, Equitable Holdings’ chief financial officer Robin Raju hinted several times that the deal was coming.

“Reg 213 will be behind as of year-end,” Raju promised the analysts.

What It Means

Many life insurers believe that New York state is requiring variable annuity issuers to hold more reserves than is necessary.

Cautious advisors with cautious clients might prefer to look for annuities from issuers that meet the extra-strict New York standards.

More aggressive advisors, with aggressive clients who live in New York state, might want to look for ways to avoid paying for products subject to the extra-tough New York annuity reserving requirements.

The Reserving Requirements

Most states have adopted annuity reserving requirements based on the National Association of Insurance Commissioners’ principles-based reserving approach, which lets life insurers set reserves based on sophisticated risk modeling efforts and the judgment of experienced, skilled actuaries.

New York state is using its own version of principles-based reserving, described in state Regulation 213, which was adopted in 2019.

Regulation 213 calls for insurers to perform the risk modeling and analyses at the heart of principles-based reserving, and also to use traditional formulas to set reserves for some types of annuities.

The Companies

Equitable Holdings prefers to use the name “Equitable Holdings” to refer to the parent company, which owns AllianceBernstein as well as Equitable Financial, and the name “Equitable” to refer to the life insurance operations.

The company as a whole was founded in 1859. It now has 5 million in client relationships and about $754 billion in assets under management.

It’s known for selling group annuities to school districts’ 403(b) defined contribution retirement plans. It recently agreed to pay $50 million to settle U.S. Securities and Exchange Commission allegations about misleading and incomplete fee information in quarterly account statements.

The company announced a $12 billion variable annuity reinsurance deal with Venerable, which has ties to Apollo Global Management’s Athene Holding life insurance affiliate, in 2020.

Equitable Holdings announced another annuity deal, with Swiss Re, in late 2021. The company has not said much about that deal but has reported that it produced about $1 billion in extra cash that Equitable Financial can use to meet the New York state reserving requirements.

Global Atlantic, the company providing the reinsurance, is an affiliate of KKR. It started up in 2004 and has gone on to reinsure about $75 billion in life and annuity assets.

“We are confident that, at the end of the year-end, we will be resolving this $1 billion in redundant reserves,” Raju said.

Pictured: Robin Raju. (Photo: Equitable)


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