Athene COO Sees Non-Variable Annuity Sales Boom Continuing

What You Need to Know

Banks tend to be slow to increase CD rates.
Athene adjusts its rates quickly.
Thanks to the rate difference, money is in motion.

Rising interest rates are continuing to push consumers to buy annuities, a top annuity issuer executive said Thursday.

Mike Downing, the chief operating officer of Athene Holding, reported that sales conditions were much better than expected in 2022 and continue to be strong now.

Last year “was a remarkable year for the life insurance industry, and the annuity portion of the industry,” Downing said. “What we’ve seen have been some of the best conditions we’ve seen in decades.”

Because insurers tend to increase annuity rate guarantees more quickly than banks increase interest rates on certificates of deposit, the new interest rate environment continues to encourage clients to move cash away from CDs and into annuities, he said.

Although clients shifted huge amounts of cash into annuities in 2022, “there’s still quite a bit more on the sidelines,” he added.

What It Means

Whether you are an agent who already sells annuities or an advisor who has been trained to swat them with a rolled-up newspaper, many clients will want to hear what you think about annuities.

Athene

Athene is one of the insurers that appeared when falling interest rates, new accounting philosophies and the 2007-2009 Great Recession pushed many life insurers away from offering annuities with rich benefits guarantees.

Older issuers discovered that they had too little capital or too little appetite for risk to support the guarantees.

Athene started up in 2009 in with a large pool of investor cash, a new approach to risk analysis and investment management, and the ability to buy insurers and large blocks of in-force annuity business at a low price.

Athene acquired the Aviva USA annuity business, and then made a series of deals to reinsure huge blocks of non-variable annuity business for the direct writers.

The company, which is controlled by Apollo Global Management, ended the third quarter of 2022 with $237 billion in assets and $195 billion in net invested assets.

The company focuses mainly on the market for non-variable annuities. In the third quarter of 2022, it beat out New York Life to rank first for sales of individual U.S. non-variable annuities. Sales of the products totaled $12.26 billion at Athene during the quarter and $12.22 billion at New York Life.

Sales Drivers

Backing a newly sold annuity takes a large amount of capital.

Athene has large pools of capital for supporting new sales, and its large size and modern systems and procedures help it keep its administrative costs very low, Downing said.

In 2022, “the conditions were perfect for Athene,” he said. “Athene tries to move fast when opportunities are present.”

That meant Athene could keep growing when it looked as if concerns about capital were holding some competitors back, he said.

A liquidity crunch rocked the United Kingdom bond market in September 2022, and there were some concerns that rising interest rates could cause other liquidity crunches or other dislocations in world investment markets in the fourth quarter.

For Athene, investment conditions have been good, and other perils that attracted securities and credit rating analysts’ attention, such as the risk that too many investors might rush to shift cash from low-interest-rate annuities into products offering higher rates, failed to materialize, Downing reported.

Meanwhile, he said, in spite of all of the attention new annuities aimed at fee-based registered investment advisors have been getting, “that sector could use a lot more penetration.”

Insurers like Athene will have to continue to improve annuity management tools for advisors and their own administrative processes to increase RIAs’ interest, Downing predicted.

Secure 3.0

One factor not exciting Mike Downing is the Setting Every Community Up for Retirement Enhancement 2.0 Act of 2022, or Secure 2.0 Act.

Some provisions could improve insurers’ ability to offer in-plan annuities to retirement plan sponsors, but Downing said he thinks Congress will have to do even more to knock down barriers to in-plan annuitization options, in a Secure 3.0 or Secure 4.0 bill, before new federal laws will have much effect on insurers’ involvement in the retirement plan market.