Recently Keefe, Bruyette & Woods (KBW), a full-service, boutique investment bank and broker-dealer that specializes in the financial services sector, held a virtual insurance conference to discuss the happenings in the life insurance and annuity markets. The investment bank, which is headquartered in Midtown Manhattan, invited 14 large and publicly traded life insurers to contribute. The following is a summary of some of the key talking points as written by Ryan Krueger, a KBW analyst, and shared in a recent ThinkAdvisor article.
“Low interest rates, social distancing, and weak economic conditions are still causing headwinds for many products,” Krueger stated.
But few of the conference participants mentioned interest rates. And “there weren’t a lot of specific commentaries by companies ahead of [second half of the year] actuarial assumptions reviews.”
Instead, speakers talked about a few new and upcoming topics.
- Sales are doing better. While outside forces are causing new headwinds, “companies commented that conditions are gradually improving and persistency has largely held up (and in some cases improved),” Krueger wrote.
- Athene is out here absorbing fixed annuity risk. The company has a reputation for acquiring “jumbo blocks” of business, but is now working on a lot of deals for blocks of business in the $1 billion to $2 billion asset range. While this doesn’t matter much to retail agents, in some cases these deals could lead to administrative changes, which could lead to the annuity holders seeking advice from financial professionals.
- Equitable wants to reinsure its variable annuity guaranteed minimum income benefit block. According to Krueger’s summary of an Equitable executive’s remarks, the bloc has plenty of reserves and good cash flow. But investor fear of guarantee risk is hurting Equitable’s stock price. Equitable apparently wants to find a high-quality reinsurer to reinsure the block.
- Prudential managers face a strange new obstacle to completing mergers and acquisitions. One executive from Prudential said that they believe its stock is a great buy right now. “The company stated that there’s a high hurdle to any material M&A at this point relative to buying back its own stock.”
- Prudential has a big block of variable annuity business that it would like to reinsure. The company is looking to reinsure a $107 billion block of variable annuity business, because Prudential “believes the market is overly discounting its valuation due to variable annuity exposure, and has concluded that transparency probably won’t solve this,” Krueger added. “Prudential says it’s looking for a deal that will be good for shareholders.”
Written by Rachel Summit