Life and Annuity Stocks Weather Credit Suisse Storm
What You Need to Know
The stocks of 16 big, public U.S. life and annuity issuers are down 21% for the month.
The stocks are up 0.2% over the past five days, and more than double what they were three years ago.
The NAIC sees $3 trillion in total U.S. insurer exposure to derivatives.
Wall Street warmed up to life and annuity issuers this week, in spite of Swiss regulators’ move to force UBS to acquire Credit Suisse.
The median share price of 16 large, publicly traded U.S. life and annuity issuers has fallen 21% in the past month, to $44.43.
But the median share price is still 130% higher than it was three years ago, and it has increased 0.2% over the past five days.
Most stock analysts predict that the Federal Reserve Board and the world’s other central bankers will take an approach that could be great for life insurers: replacing efforts to shove interests up quickly with gentle moves to nudge rates more slowly.
But details on just what the new conditions could mean for life and annuity issuers’ $3 trillion in derivatives exposure have been scarce.
What It Means
Investors seem to think that the companies backing your clients’ life insurance policies and annuity contracts will get through the current rough waters.
The Spring Run
Depositors’ and investors’ general sense of unease has powered runs, for a variety of reasons, at several different banks in the past 10 days.
Regulators have cited concerns about asset-liability matching as the driver in the run that shut down Silicon Valley Bank, worries about involvement with cryptocurrency for a takeover of Signature Bank of New York, and fears about governance as a top cause of the forced UBS-Credit Suisse marriage.
The Insurers
The insurers we included in our analysis are American Equity Investment Life, Ameriprise, Brighthouse Financial, CNO Financial, Corebridge Financial, Equitable Holdings, F&G Annuities & Life, Globe Life, Genworth Financial, Globe Life, Jackson Financial, Lincoln National, MetLife, Principal Financial, Primerica, Prudential Financial and Reinsurance Group of America.
Some of the companies may have ample cash to help support their own stock prices.
American Equity, for example, announced Monday that it was working with JPMorgan to spend an extra $200 million on buying back shares of its own common stock, on top of its existing $276 million stock repurchase fund.
The extra share buyback amounts to about 7% of the company’s $2.9 billion market capitalization amount, or the total value of all outstanding shares of American Equity common stock.
The Derivatives
Regulators and rating agencies have talked at length about financial services companies’ direct exposure to stocks and bonds issued by the companies in that sector that have been subject to sudden regulatory action.
Details about the possible effects of the regulatory actions on the derivatives markets have been scarce.
