Investment market volatility is helping Equitable Holdings sell more annuities.
"April was a good month for us," Equitable CEO Mark Pearson told securities analysts Wednesday during a conference call.
Nick Lane, president of the company's Equitable Financial unit, said that individual annuity sales were strong in the first quarter, which ended March 31, and continue to be strong, thanks to the aging of the U.S. population and people's worries about stock prices.
"Research shows that 70% of people out there are concerned about the impact of volatility on their assets," Lane said. "We're well-positioned to meet that need."
Total first-year premiums and deposits for individual retirement products increased 5.8%, to $4.6 billion.
What it means: Some financial planners may still be skeptical about the value of annuities, but retirement savers like them.
Sales commissions: Annuity sales have been so strong that rising sales commissions pinched earnings in the first quarter, according to Robin Raju, Equitable's chief financial officer.
Operating earnings at the individual retirement unit fell to $216 million on $997 million in revenue, from $238 million on $840 million in revenue for the first quarter of 2024.
That was partly because commissions and distribution-related payments rose 27%, to $98 million.
"We expect compensation expense to normalize in the second quarter, but commissions will depend on sales levels and the mix by channel," Raju said.
RILA competition: A registered index-linked annuity contract lets the issuer tie the crediting rate to the performance of one or more investment market indexes and hedge the risk using off-the-shelf index options.
Although RILA market competition is increasing, "increased competition in RILA has continued to grow the size of the pie," Lane said. "It raises advisor awareness."
Equitable believes that, given the size of retirement savers' needs, the market for annuities and related products is still underpenetrated, Lane said.
When new entrants enter, "there tends to be a period of aggressive pricing," Lane said. "We've seen this before, and it tends to be temporary."
Earnings: Equitable as a whole reported $150 million in net income for the latest quarter on $4.6 billion in revenue, compared with $195 million in net income on $2.2 billion in revenue for the year-earlier quarter.
The company is moving forward with a life reinsurance deal that should free up $2 billion in capital by mid-year.
Credit: New York Stock Exchange
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