Ameriprise Continues to Shift Away From Life and Annuity Guarantees

Deal Outlook

Cracchiolo told Andrew Kligerman, an analyst with Credit Suisse, that Ameriprise is not impressed by the offers would-be buyers are making for its kind of life and annuity business, and that it’s not eager to make acquisitions of its own right now.

“There aren’t a lot of market participants that are interested in what I would call high-quality books,” Cracchiolo said. “We don’t think the market has sufficiently evolved to look at the type of business that we have, and the type of value that we realize from the business,”

Ameriprise is getting good profits, good cash flow and good stability from the insurance policies and annuity contracts on its books, including from the long-term care insurance policies it once sold, Cracchiolo added.

Meanwhile, Cracchiolo said, Ameriprise feels that market dislocation makes this a time to engage with clients and integrate businesses acquired in the past.

In the future, if good deals appear, “maybe we’ll play,” he said. “Right now, it’s not something that we have on the plate.”

Advisors

Ameriprise executives reported that the company’s advisor recruit pipeline looks strong.

The company added 89 advisors during the third quarter, and it increased the total number of advisors to 10,282, from 10,073 a year earlier.

Advisor retention levels held steady, and revenue per advisor increased 7%, to $819,000.

The United Kingdom

One of the questions going into the third-quarter earnings release season was whether the recent government bond market turmoil in London would be getting much attention from  U.S. life and annuity issuers.

Rising interest rates and proposed shifts in U.K. government tax rules led to upheaval in September and early October for U.K. pension plans that use derivatives to hedge “liability-driven investment” strategy risk, or LDI risk.

Suneet Kamath, an analyst with Jefferies, asked Ameriprise executives about the effects of the U.K. market problems.

Cracchiolo told Kamath that some pension plan clients had to add collateral to meet hedging arrangement requirements.

“The volatility was something that wasn’t necessarily seen in the past,” he added. “It was a 15 to 18 standard deviation event, which is really abnormal.”

Some clients had to free up assets to provide the collateral needed, Cracchiolo said.

“We think this will normalize over time,” he said. “The market will come back around… But we do expect some adjustments in the market going forward. Some players would have to adjust leverage a bit. There may be some more operational adjustments, to make sure that the markets can flow a bit more easily as you get these types of dislocations.”

Cracchiolo emphasized that Ameriprise itself saw no asset outflows as a result of the London bond market turmoil.

“In fact,” he said, “there’s some new business that came in. So, we feel like this market will recover. And we feel like we can still do good business there.”

James Cracchiolo. (Photo: Ameriprise)