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July 26, 2018 at 02:13 PM
Executives at Ameriprise Financial Inc. like the company’s variable annuity business and are not that interested in selling it, in spite of some securities analysts’ concerns about any company having exposure to annuity guarantee obligations.
The executives are somewhat more interested in proposals for long-term care insurance (LTCI) block deals, but only if a suitor can show how it would protect Ameriprise against future problems.
Executives from the Minneapolis-based insurer gave their views on would-be unit buyers Wednesday, during a conference call with securities analysts.
One analyst noted that private equity firms have been out making deals for big blocks of annuity business and showing some interest in LTCI blocks. He asked the Ameriprise executives about the kinds of deals they might consider.
(Related: What a Big Annuity Issuer Sees Out There Now)
Walter Berman, the Ameriprise chief financial officer, acknowledged that buyers are out there.
“Obviously, we’ve gotten more inquiries,” he said.
But the variable annuity business is an excellent business that generates excellent returns, Berman said.
For Ameriprise to take an offer for the variable annuity business seriously, “it would have to be an offer that would create shareholder value,” Berman said.
For the LTCI unit, which has not sold new policies since 2002, “we are preparing for and certainly would entertain offers,” Berman said.
From the perspective of Ameriprise, an attractive offer for the LTCI unit would “give us a reasonable share of return,” considering the potential risks related to reinsurance, and the potential risks and opportunities that shifts in interest rates could create, Berman said.
“So, yes,” Berman said. “We’re prepared. But an offer has to meet certain hurdles for shareholder returns, and provide the right protections from a contingency standpoint.”
LTCI Operations
Berman said during the call that the company has not sold a new LTCI policy since 2002, and that the block of LTCI policies that’s left over is performing as expected.
Here’s how Berman described the company’s two blocks of LTCI policies:
Policies Sold From 1987 through 1997
Average policyholder attained age: 80
Average age of a policyholder on claim: 87
Percentage of the policyholders on claim: 8%
Policies Sold From 1997 through 2002
Average policyholder attained age: 75
Average age of a policyholder on claim: 84
Percentage of the policyholders on claim: 5%
Ameriprise has deep knowledge of how the policyholders behave, the block is shrinking because of the age of the insureds, and actual results have been very close to expectations, Berman said.
