Ameriprise May Be Close to Making a Big Reinsurance Deal
CFO Walter Berman says there's a bid-ask gap in reinsurance, which represents an opportunity.
Ameriprise could be closer to using a big reinsurance deal to limit its exposure to life insurance or annuity risk.
Walter Berman, the Minneapolis-based financial services company’s chief financial officer, hinted about the possibility last week during a conference call with securities analysts.
One analyst asked Berman for an update on efforts to make a reinsurance deal for the company’s Retirement and Protection Solutions Division, which offers life insurance and annuities. Many other life insurers have freed up $1 billion or more in cash by reinsuring blocks of in-force life and annuities in recent years.
“We have certainly observed the recent transactions,” Berman said.
Thanks to relatively high interest rates, the gap between what Ameriprise might be open to paying for reinsurance and what reinsurers want is narrowing, and that narrowing of the bid-ask gaps provides an opportunity, Berman said.
What it means: Ameriprise, like many other insurers, has focused on shifting toward selling life insurance policies and annuities with only limited benefits guarantees.
Ready access to reinsurance could make a company like Ameriprise feel more comfortable about offering your clients annuities with income guarantees.
The earnings: Ameriprise held the conference call to go over its earnings for the fourth quarter.
The company is reporting $377 million in net income for the quarter on $4.2 billion in revenue, compared with $649 million in net income on $3.7 billion in revenue for the fourth quarter of 2022.
The company’s own distribution fee revenue fell 11%, to $469 million. Its spending on commissions and other distribution costs fell 9%, to $1.3 billion.
But retirement division revenue increased 13%, to $918 million, and its spending on distribution increased 15%, to $117 million.
Variable annuity deposits rose 15%, to $1.1 billion.
Ameriprise once sold long-term care insurance. Its closed block of LTCI policies posted $10 million in pretax adjusted operating income on $72 million in revenue, up from $1 million in operating income on $68 million in revenue.
Credit: Bloomberg