Prudential Financial thinks the economic weather will still be good for U.S. individual annuity sales this year.
The company is predicting that total account value for the annuities the company wants to sell will grow 20% to 25% this year, to more than $50 billion.
Caroline Feeney, the head of Prudential's U.S. businesses, said during a conference call with securities analysts Wednesday that overall sales should be strong even if the outlook for some annuities is sunnier than for others.
"We continue to see those compelling tailwinds in the marketplace," Feeney said.
What it means: If demand for retirement savings arrangements that offer the potential for growth along with the promise of a safety cushion could continue to be strong.
The products: Registered index-linked annuities, or RILAs, have crediting rates that can be linked to the performance of investment indexes.
Multi-year guaranteed annuities, or MYGAs, offer a guaranteed minimum rate of return and some hope of a rate increase if overall interest rates rise.
The outlook: Prudential executives held the call to go after earnings for the fourth quarter of 2024 with securities analysts.
Suneet Kamath, a securities analyst with Jefferies, asked Prudential executives how to reconcile their annuity value growth forecast with LIMRA's prediction that U.S. individual annuities might fall this year, simply because 2024 sales were so high.
Because of recent interest rate decreases, "what we're seeing is a shift from MYGAs, which are more sensitive to rates, to indexed products, such as RILAs," Feeney said.
But the U.S. population is still aging, and the effect of falling rates on assets in money market funds and fixed annuities with surrender-charge periods that are ending is putting a high volume of money in motion, Feeney said.
Demographics and the amount of cash that's ready to move should help annuity sales volume, Feeney said.
The results: Prudential is reporting $1.1 billion in adjusted operating income for the fourth quarter on $13 billion in revenue, up from $926 million in adjusted operating income on $13 billion in revenue for the fourth quarter of 2023.
Net earnings, which includes the effects of changes in the estimated value of investments and benefits, fell to $73 million, from $13 billion.
Sales of FlexGuard RILA contracts increased to $2.5 billion, from $1.3 billion, and sales of fixed annuities increased to $1.1 billion, from $804 million.
The total asset value of the favored annuities increased to $44 billion, from $29 billion.
The total asset value that Prudential has discontinued, including traditional variable annuities, fell to $83 billion, from $89 billion.
Caroline Feeney. Courtesy photo
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