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Ameriprise Continues to Shift Away From Life and Annuity Guarantees

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What You Need to Know

  • Jim Cracchiolo, the CEO, thinks central banks will have to continue to focus on fighting inflation.
  • He questions whether many buyers are seeking high-quality life and annuity operations.
  • Revenue per advisor is continuing to increase.

Interest rates are rising, but Ameriprise Financial is still working to reduce exposure to life insurance and annuity guarantee risk.

Jim Cracchiolo, the CEO of the Minneapolis-based company, said Wednesday that he believes the Federal Reserve Board and other central banks will have to continue to increase interest rates to get inflation under control.

The increases in interest rates “will lead to a slowing of the U.S. and European economies,” Cracchiolo said. “It looks more like we’re heading for a mild recession. Therefore, I expect there will be more volatility ahead.”

Life insurers make heavy use of bonds and other fixed-income assets to support life insurance and annuity guarantees. After the second quarter, some life insurance company executives suggested that the recent increase in interest rates would be an opportunity to assume more guarantee risk and increase the rates promised to customers.

Walter Berman, Ameriprise’s chief financial officer, said the company will continue to focus on sales of low-guarantee products, such as variable annuities without living benefits and variable universal life insurance. The firm’s strategy continues to focus on reducing the need to pay fixed benefits as its own investments perform poorly due to low interest rates on bonds, stock market declines and other issues in the financial markets.

What It Means

Helping clients lock in strong life insurance and annuity benefits guarantees might get harder before it gets easier.

The Earnings

Ameriprise executives talked about the economy and the company’s life and annuity business during a conference call the company held to go over earnings for the third quarter.

The quarter ended Sept. 30.

Ameriprise is reporting $548 million in net income for the quarter on $3.5 billion in revenue, compared with $1 billion in net income on $2.9 billion in revenue for the third quarter of 2021.

Results for the year-earlier quarter included a $521 million operating income gain related to an annuity reinsurance transaction.

The Ameriprise Retirement & Protection Solutions unit, which sells annuities, life insurance and disability insurance, reported $31 million in pretax adjusted operating earnings for the latest quarter on $786 million in adjusted operating net revenues, compared with $187 million in operating earnings on $834 million in adjusted operating net revenues for the year-earlier quarter.

The adjusted operating earnings figures include the effects of “unlocking” earlier assumptions about Retirement & Protection Solutions unit performance.

Operating earnings excluding the effects of the unlocking increased to $203 million, from $192 million.

“The business continued to generate strong free cash flow and a high return on capital,” Ameriprise said.

Annuity and Insurance Sales

Ameriprise variable annuity sales fell to $948 million in the third quarter, down 35% from the total for the year-earlier quarter.

The decrease reflected the “discontinuation of sales with living benefit riders that was completed in June, as well as industry slowdown due to market dislocation,” the company said.

Sales of life insurance and disability insurance fell 29%, to $65 million, “primarily due to market volatility,” the company reported.

Most of the product sales involve variable universal life policies, which help customers accumulate assets and offer relatively high profit margins for Ameriprise.

Deal Outlook

Cracchiolo told Andrew Kligerman, an analyst with Credit Suisse, that Ameriprise is not impressed by the offers would-be buyers are making for its kind of life and annuity business, and that it’s not eager to make acquisitions of its own right now.

“There aren’t a lot of market participants that are interested in what I would call high-quality books,” Cracchiolo said. “We don’t think the market has sufficiently evolved to look at the type of business that we have, and the type of value that we realize from the business,”

Ameriprise is getting good profits, good cash flow and good stability from the insurance policies and annuity contracts on its books, including from the long-term care insurance policies it once sold, Cracchiolo added.

Meanwhile, Cracchiolo said, Ameriprise feels that market dislocation makes this a time to engage with clients and integrate businesses acquired in the past.

In the future, if good deals appear, “maybe we’ll play,” he said. “Right now, it’s not something that we have on the plate.”


Ameriprise executives reported that the company’s advisor recruit pipeline looks strong.

The company added 89 advisors during the third quarter, and it increased the total number of advisors to 10,282, from 10,073 a year earlier.

Advisor retention levels held steady, and revenue per advisor increased 7%, to $819,000.

The United Kingdom

One of the questions going into the third-quarter earnings release season was whether the recent government bond market turmoil in London would be getting much attention from  U.S. life and annuity issuers.

Rising interest rates and proposed shifts in U.K. government tax rules led to upheaval in September and early October for U.K. pension plans that use derivatives to hedge “liability-driven investment” strategy risk, or LDI risk.

Suneet Kamath, an analyst with Jefferies, asked Ameriprise executives about the effects of the U.K. market problems.

Cracchiolo told Kamath that some pension plan clients had to add collateral to meet hedging arrangement requirements.

“The volatility was something that wasn’t necessarily seen in the past,” he added. “It was a 15 to 18 standard deviation event, which is really abnormal.”

Some clients had to free up assets to provide the collateral needed, Cracchiolo said.

“We think this will normalize over time,” he said. “The market will come back around… But we do expect some adjustments in the market going forward. Some players would have to adjust leverage a bit. There may be some more operational adjustments, to make sure that the markets can flow a bit more easily as you get these types of dislocations.”

Cracchiolo emphasized that Ameriprise itself saw no asset outflows as a result of the London bond market turmoil.

“In fact,” he said, “there’s some new business that came in. So, we feel like this market will recover. And we feel like we can still do good business there.”

James Cracchiolo. (Photo: Ameriprise)


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