The U.S. market for registered index-linked annuities is a tough place to operate these days, but there are still plenty of U.S. retirement savers with cash that could flow into annuities or other individual retirement savings and investment vehicles.
Andrew Sullivan, the chief executive officer of Prudential Financial, gave that assessment Thursday during a conference call with securities analysts.
Prudential held the call to review its earnings for the second quarter, which ended June 30. Prudential sales of RILA contracts fell 23% between the second quarter of 2024 and the latest quarter, to $1.7 billion.
Suneet Kamath, an analyst at Jefferies, asked about the state of competition in the RILA market.
"We do believe the market has become more competitive," Sullivan said.
The number of RILA issuers has increased to 25 today, from five a few years ago, and "these new entrants are working pretty hard in order to, obviously, fragment that market share," Sullivan said.
Prudential will compete hard for a share of that market but take a disciplined approach to pricing, Sullivan said.
Sullivan said the market for RILAs and other individual investment products still has room for growth.
"There's $7 trillion sitting on the sidelines and in money market funds," Sullivan said. "We live in an aging society. That society needs protected income."
Prudential streamed the call live and posted a link to a recording on its website.
What it means: If annuity issuers find the RILA market is no longer as beneficial for them as it used to be and are still leery of the traditional variable annuity market, issuers that like traditional markets might give more attention to income annuities, which help retirees convert assets into income streams.
Issuers that want to be more innovative might give more attention to contingent deferred annuities, or contracts that can help retirement savers get income out of their own retirement nest eggs, without the need to move the underlying assets.
The earnings: Prudential reported $566 million in net income for the second quarter on $13.5 billion in revenue, compared with $1.2 billion in net income on $13.8 billion in revenue for the second quarter of 2024.
After-tax adjusted operating income, which excludes the effects of changes in the value of the company's assets and benefits obligations, increased to $1.3 billion, from $1.2 billion.
Although RILA sales fell, overall sales of the other types of annuities Prudential wants to sell — fixed annuities and investment-only variable annuities — increased 12%, to $1.4 billion.
Prudential CEO Andrew Sullivan. Credit: Prudential
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