7 New Peeks Inside Annuity Issuers’ Curtains
August 7, 2018 by Allison Bell
Some U.S. annuity issuers did well in the first quarter, and some “faced headwinds.”
Earnings turbulence continued in the second quarter.
Ameriprise Financial Inc. started the second-quarter earnings release season more than a week ago, by jumping into the cold earnings release season water and announcing higher earnings, higher revenue, and a mix of good and bad numbers at its annuity division. New variable annuity deposits, for example, increased 16%, to $1.2 billion.
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Many other issuers have followed Ameriprise into the water and reported their results in the past week.
Here’s a look at seven of the issuers’ results.x
American Equity Investment Life Holding Co.
The West Des Moines, Iowa-based company is reporting $94 million in net income for the second quarter on $685 million in revenue, compared with $27 million in net income on $819 million in revenue for the second quarter of 2017.
Spending on “amortization of deferred sales inducements” increased to $78 million, from $34 million.
The fair value of embedded derivatives swung to a net loss of $102 million, from a net gain of $175 million.
Here’s what happened to sales for major types of annuities between the second quarter of 2017 and the latest quarter:
Index: Held steady at $1.1 billion.
Multi-Year Fixed Rate: Increased to $54 million, from $28 million.
Single-Premium Immediate: Increased to $5.4 million, from $5 million.
American International Group Inc.
The New York-based company is reporting $937 million in net income for the second quarter on $12 billion in revenue, compared with $1.2 billion in net income on $13 billion in revenue for the second quarter of 2017.
AIG’s life and retirement unit is reporting $962 million in adjusted pre-tax income on $3.5 billion in revenue, compared with $993 million in adjusted pre-tax income on $3.4 billion in revenue for the year-earlier quarter.
The individual retirement unit, which is part of the life and retirement unit, is reporting $250 million in pre-tax income on $730 million in revenue, compared with $266 million in pre-tax income on $696 million in revenue.
At the individual retirement unit, amortization of deferred policy acquisition cost (DAC) amounts, which include sales compensation spending, increased to $130 million, from $126 million.
Non-deferrable insurance commission spending increased to $80 million, from $73 million.
Here are how net flows of cash looked for major types of annuities.
Index: Inflows increased to $800 million, from $600 million in the year-earlier quarter.
Fixed: Outflow fell to $500 million, from $900 million.
Variable: Outflows increased to $400 million, from $300 million.
The spread between what AIG earned on investments and what it paid the annuity holders fell to 2.08%, from 2.23%, for fixed annuities, but the spread increased to 3.49%, from 3.28%, for variable and index annuities.
AIG is reporting $411 million in net gains on derivatives and hedging, compared with a $298
Athene Holding Ltd.
The Pembroke, Bermuda-based company is reporting $264 million in net income for the second quarter on $1.8 billion in revenue, compared with $326 million in net income on $1.8 billion in revenue for the year-earlier quarter.
The company has now completed the acquisition of a large annuity business from Voya Inc.
The company says channel expansion and launches of new products, including the Athene Agility contract, helped it increase deposits from new retail annuity sales to $2 billion, from $1.6 billion for the year-earlier quarter.
Sales through banks and broker-dealers tripled, the company says.
Brighthouse Financial Inc.
The Charlotte, North Carolina-based company is reporting a $239 million net loss for the second quarter on $1.7 billion in revenue, compared with a $67 million net loss on $1.8 billion in revenue for the second quarter of 2017.
The annuity unit is reporting $221 million in adjusted earnings for the quarter on $1.1 billion in adjusted revenue, compared with $226 million in adjusted earnings on $1.1 billion in revenue for the year-earlier quarter.
Sales of the Shield annuity contracts increased to $723 million, from $570 million, and sales of all variable and index annuities increased to $1.1 billion, from $935 million.
Sales of fixed annuities increased to $323 million, from $60 million.
Sales of single-premium immediate annuities, which are included in the fixed annuity sales total, increased to $13 million, from $8 million.
FBL Financial Group Inc.
The West Des Moines, Iowa-based company is reporting $32 million in net income for the second quarter on $190 million in revenue, compared with $32 million in net income on $189 million in revenue for the second quarter of 2017.
Annuity commission expense, net of deferrals, increased to $518,000, from $483,000.
Life commission expense, net of deferrals, fell to $4.7 million, from $4.9 million.
Here’s what happened to first-year collected premiums from some of the products FBL sells:
Fixed Annuities: Fell to $22 million, from $26 million.
Universal Life: Fell to $8 million, from $8.1 million.
Lincoln National Corp.
The Radnor, Pennsylvania-based company is reporting $385 million in net income for the second quarter on $4 billion in revenue, compared with $412 million in net income on $3.6 billion in revenue for the second quarter of 2017.
The annuity operation is reporting $275 million in after-tax annuity operating earnings on $1.1 billion in operating revenue, up from $251 million in earnings on $1.1 billion in operating revenue for the year-earlier quarter.
Annuity commissions incurred increased to $265 million, from $222 million.
Life earnings increased to $150 million on $1.7 billion in operating revenue, from $133 million on $1.7 billion in operating revenue.
Life insurance commissions incurred fell to $166 million, from $190 million.
Here’s what happened to sales of some of the products Lincoln offers:
- Variable Annuities With Guaranteed Living Benefits: Increased to $1.5 billion, from $1 billion.
- Variable Annuities Without Guaranteed Living Benefits: Fell to $598 million, from $607 million.
- Fixed Annuities: Increased to $889 million, from $377 million.
- MoneyGuard: Fell to $57 million, from $80 million.
Lincoln notes that the year-earlier MoneyGuard sales were unusually high because of extra sales related to a price increase announcement.
Prudential Financial Inc.
The Newark, New Jersey-based company is reporting $200 million in net income for the second quarter on $15 billion in revenue, compared with $496 million in net income on $13 billion in revenue for the second quarter of 2017.
The U.S. individual annuity unit is reporting $342 million in operating income for the latest quarter on $1.3 billion in revenue, compared with a $442 million loss on $1.3 billion in revenue for the year-earlier quarter.
The U.S. individual life unit is reporting a $49 million operating loss on $1.5 billion in revenue, compared with a $392 million operating loss on $654 million in revenue for the year-earlier quarter.
U.S. individual annuity sales increased to $2.1 billion, from $1.5 billion.
U.S. individual life sales fell to $142 million, from $153 million.
Here’s what happened to U.S. sales of some of the individual products Prudential sells:
Term Life: Held steady at $54 million.
Variable Life: Increased to $35 million, from $26 million.
