The head of an asset manager that owns a big annuity issuer is unimpressed by the assets at some other annuity issuers.
Marc Rowan, the chief executive officer of Apollo Global Management, the parent of Athene, talked about the state of annuity issuer investments Tuesday during a conference call with securities analysts.
Rowan told the analysts that he believes the retirement investment market continues to be a great market.
He argued, as he has during earlier analyst calls, that financial services companies need to use annuities and other arrangements to help move retirement savers away from relying on mutual funds that get much of their value from just a few stocks.
"People suggest there's $12 trillion to $13 trillion in 401(k)s that'll be there on average for 50 years," Rowan said. "These people are for the most part invested in daily-liquid stock index funds for 50 years."
The funds have done well, Rowan said.
"But 10 stocks are now 40% of the S&P, and their returns are leveraged to Nvidia," Rowan said, referring to the chipmaker behind the current artificial intelligence boom. "We basically have leveraged the retirement system of the country to Nvidia."
Rowan also elaborated on his earlier arguments that some of Athene's less efficient, more weakly funded competitors are straining to compete with Athene by channeling business through entities based in the Cayman Islands.
"We have been asleep at the regulatory switch, and $150 billion of reserves have moved offshore to the Cayman Islands, with a fraction of the capital of the U.S or Bermuda system, putting the system at risk," Rowan said.
State-based insurance regulators "have a choice of evolving to address this issue in Cayman or risk someone stepping in and usurping their authority, because it is a hot-button issue around our industry," Rowan said. "It is a hot-button issue in D.C."
Rowan suggested that independent marketing organizations, or life and annuity distributors, may be contributing to the problems.
For now, if an annuity issuer is more weakly capitalized, it "can penetrate a portion of the market that does not care about credit quality, which is called the IMO market," Rowan said. "In that sector where credit does not matter, we see people paying up for liabilities, and we have reduced our share."
The Cayman Islands. Credit: Ramunas Bruzas/Shutterstock
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