This might be a good time for clients who like annuities with high guaranteed rates to act, because some big issuers are starting to sound less interested in offering the product.
The possibility that the window for good deals on multi-year guaranteed annuity contracts might be closing emerged from the recent round of earnings calls for the first quarter.
The investment market volatility that crackled in the first quarter and flared in early April, at the start of the second quarter, led to executives at companies like Brighthouse, Corebridge, F&G Annuities & Life and Jackson to talk about how happy they are to have growing books of registered index-linked annuity contracts.
The RILA side: When an annuity issuer writes a RILA contract, it usually pays a stock index option provider to absorb most of the investment market volatility risk.
Don Cummings, the chief financial officer at Jackson, pointed out that a RILA product is a spread-based product, rather than a fee-based product.
When cash flows into RILA contracts, "these net flows provide valuable economic diversification and hedging efficiency benefits," Cummings said.
The MYGA side: When insurers issue MYGAs, they may have reinsurers or other parties hedge the investment risk away, or they may shoulder the risk themselves.
F&G, for example, let MYGA sales fall to $562 million in the first quarter, from $1.3 billion in the first quarter of 2024.
"That was just simply a function of the volatility that was going on in the markets, which caused challenges, not just for us, but for some of our reinsurance partners," Chris Blunt, the company's CEO, said during a conference call with securities analysts.
"We were cautious when it came to MYGA in the first quarter and wanting to make sure we understood the lay of the land, with rates and with spreads," Blunt said.
F&G wants to increase RILA sales every quarter, whatever the investment markets are doing, but "in this type of an environment, MYGA is going to be a bit lumpier," Blunt said. "We're going to see a little more MYGA volatility."
F&G ended up turning the spigot back on later in April, and MYGA sales have rebounded, Blunt said.
"In fact, we've done more MYGA business in the month of April than we did the entire first quarter," Blunt said. "So I think the sales engine is in great shape."
What it means: Issuers like F&G are still writing huge amounts of MYGA business, and many issuers are competing vigorously for MYGA sales.
But issuers' appetite for absorbing clients' guarantee risk could be lumpy.
Credit: Adobe Stock
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.