This Annuity Can Take On Mutual Funds: F&G's Chris Blunt

Chris Blunt believes that registered index-linked annuities can do better than dominating the annuity market.

Blunt is the chief executive officer of F&G Annuities and Life, which launched its first RILA product, the F&G Confidence Builder annuity, last week.

Competitors generated $47 billion in RILA sales in 2023, according to LIMRA data.

That’s’ “just scratching the surface,” Blunt told securities analysts Thursday during a conference call. “This is a product that now starts to compete very actively with mutual funds, which, as you know, is a $1 trillion marketplace. So, we’re really psyched about it.”

What it means: Maybe more of your clients’ mutual fund assets will flow into RILAs.

The earnings: F&G held the conference call to go over earnings for the fourth quarter of 2023.

The Des Moines, Iowa-based company reported a $299 million net loss for the quarter on $1.6 billion in revenue, compared with a $176 million net loss on $627 million in revenue for the year-earlier quarter.

Adjusted net earnings, which exclude the effects of estimates changes in the value of derivative, investments and benefits promises, fell to $75 million, from $130 million.

Overall sales increased to $4.1 billion, from $2.7 billion.

Sales of non-variable indexed annuities fell to $1.1 billion, from $1.4 billion, and sales of traditional fixed annuities increased to $1.8 billion, from $1.1 billion.

Registered index-linked annuities: A RILA is a variable annuity with investment options powered by derivatives and U.S. Securities and Exchange Commission registration as a security.

The issuer can pass on some or all market losses to the annuity holders. For the issuer, the loss-shedding possibilities and derivatives-based investments simplify risk management.

Multi-year guaranteed annuities: F&G already sells MYGA contracts, or traditional annuities that provide a fixed crediting rate for longer than a year.

Wendy Young, F&G’s chief financial officer, said MYGA surrenders and MYGA sales were both up in 2023.

“For insurance companies like F&G, surrenders typically provide a boost to earnings from the higher surrender charge fees and freed up capital from the policy lapse,” Young added.

Capital needs: Young reported that an insurer needs about $150 million in capital to support every $1 billion of annuity business that it keeps on its own books, rather than passing on to a reinsurer.

Deals: Blunt said F&G paid $270 million in January for a 70% stake in a life and annuity wholesaler that serves financial institutions and broker-dealers.

Chris Blunt. Credit: F&G