Equitable Sees 'Rational' Registered Index-Linked Annuity Pricing

What You Need to Know

Despite the new RILA market competition, Equitable’s RILAs increased 10% between the first quarter of 2021 and the latest quarter.
Life and annuity executives say their companies are doing well despite years of low interest rates and a deadly pandemic.
F&G expects to have shares that will trade on the New York Stock Exchange, with the stock symbol FG.

Equitable Holdings’ life insurance business helped create the modern market for registered index-linked annuities, or RILAs.

Many other life insurers are now entering that market, attracted by the ability to tie returns to easy-to-manage options contracts, while having the ability to adjust just how much or how little market risk they protect the contract holder against.

Despite the new RILA market competition, Equitable’s RILAs increased 10% between the first quarter of 2021 and the latest quarter, to $2 billion.

Moreover, in spite all of the new RILA players, “we continue to see rational pricing in the RILA market,” Robin Raju, Equitable’s chief financial officer, told securities analysts Tuesday on a conference call the company held to go over first-quarter earnings.

The Big Picture

Raju — and other executives at big life and annuity issuers — looked out at the world this week and said they’re in a good position to help their customers protect their families and prepare for retirement.

The Federal Reserve Board started the week by complaining that it thinks life insurers have relatively high levels of debt.

But life and annuity executives noted that their companies have gotten through years of accounting and regulatory turmoil, years of low interest rates, and a COVID-19 pandemic that has killed 1 million people in the United States, and are doing well.

Mark Pearson, Equitable’s CEO, talked about the importance of insurers’ strength to the nation Tuesday, when his company went over its first-quarter earnings with securities analysts.

He noted that Equitable paid $61 million life insurance claims related to the COVID-19 pandemic in the first quarter alone, and that this result was within the range the company might have expected, given that it has suggested in the past that it expects to record about $30 million to $60 million in post-tax excess mortality costs per 100,000 U.S. pandemic-related deaths.

The United States recorded about 160,000 COVID-19 deaths in the first quarter.

“Equitable’s life products serve an important need in these difficult times,” Pearson said.

Pearson also talked about the role a company like Equitable meets when discussing the company’s target-date funds for defined contribution retirement plans, annuities, and new annuitization features for retirement plans.

“Obviously, we are meeting an important social need,” Pearson said.

Equitable is as strong as it is partly because it has used a big reinsurance arrangement and change in the mix of products it sales to reduce risk, and it is now generating significant, steady fee income from the 4,300 advisors on its holistic life planning team, Pearson said.

Rising interest rates increased yields on newly invested money to 0.5 percentage points higher than the rates Equitable is earning on maturing assets.

“This creates a tailwind for our business,” Pearson said.

Hedging and Distribution

Laura Prieskorn, CEO of Jackson Financial, and Marcia Wadsten, Jackson’s CFO, talked to analysts on Jackson’s earnings call about the derivatives programs insurers use to run and manage risk at big annuity operations.

Because of the way the programs work, some of the positive effects from rising interest rates could show up in earnings, risk-based capital ratio and other metrics at different times than the negative effects, Wadsten said.

Prieskorn said that overall, the future looks bright.

“We believe the opportunity for annuities to meet the retirement income and saving means of Americans will remain robust,” Prieskorn said.

Prieskorn noted that Jackson has added a relationship with Raymond James’ Producers Choice Network, which has relationships with about 6,500 financial professionals and fee-based RIAs.

When the COVID-19 pandemic began, Jackson’s wholesalers had trouble meeting agents and advisors in person.

In the first quarter, in-person meetings returned, Prieskorn said.

“Meeting face to face enhances advisor engagement and builds product relation for Jackson and our distribution partners,” Prieskorn said.

An IPO

At Fidelity National Financial, the parent of F&G Annuities & Life, the focus of the earnings call was F&G’s upcoming call.

Fidelity National wants to distribute a 15% stake in F&G by paying a dividend to its own shareholders by the end of the year, simply to make F&G a higher-profile business and draw investors’ attention to the fact that it has been doing well.

One bit of spinoff news: F&G expects to have shares that will trade on the New York Stock Exchange, with the stock symbol FG.