The Annuity Market Might Split: CFRA Analyst

A split between two different kinds of life insurance company owners could lead to a split in the U.S. retail annuity market.

Catherine Seifert, a vice president at CFRA Research, discusses that possibility in a new review of U.S. and Canadian life insurers.

“Private equity” firms, or investment firms, have bought some annuity issuers. Other big annuity issuers, including MassMutual, New York Life, Nationwide and Pacific Life, are “mutual insurers,” or insurers owned by their policyholders.

Because the mutual insurers are owned by the policyholders, “they are more likely to be focused on financial strength for the sake of policyholders instead of boosting profitability for investors,” Seifert suggested.

The private equity firms may have had a tendency to acquire poorly performing blocks of annuities, and, because of pressure to improve the performance of those blocks, they “are likely to take steps to increase profitability, which could include curtailing certain contract benefits and guarantees,” she said.

What It Means

Today, some private equity-owned life insurers look as if they’re competing hard to offer your clients great annuity deals.

In the long run, if Seifert is correct, the mutuals could have a tendency to offer better price, crediting rate and financial strength rating combinations.

Assets

Many analyses of the U.S. retail annuity market focus on sales.