3 Things Jackson Is Saying About the Annuity Market Now
Today, interest rates are lower, using earnings on bonds to support guarantees is more difficult, and many issuers are talking about efforts to eliminate or minimize sales of annuities with guarantees.
Marcia Wadsten, Jackson’s chief financial officer, said during the Jackson analyst call that has focused on sales of traditional variable annuities and new registered index-linked annuities, or RILAs, without lifetime benefit guarantees.
Sales of annuities without lifetime benefits guarantees amounted to 37% of the company’s $5 billion in retail annuity sales in the latest quarter, up from 27% in the year-earlier quarter, she said.
3. The current level of volatility seems manageable.
When another annuity issuer, American Equity Life, released earnings in mid-February, its executives mentioned volatility just once during their earnings call and spoke only briefly about hedging, or efforts to use derivatives and other arrangements and strategies to manage interest rate risk, investment price risk and other forms of risk.
The Jackson executives spoke after Russia’s invasion of Ukraine rocked world financial markets.
The executives talked about volatility and hedging often, both in their own presentations and in response to analyst questions.
Wadsten noted that Jackson bases fee calculations on annuity benefits totals, rather than on account value.
Basing the fees on benefit value “provides stability to the guarantee fee stream and protects our hedging budgets when markets decline,” she said.
An analyst asked about the effects of the broader economic environment, and the recent drop in stock prices.
“We’ve certainly worked through many types of market conditions over time, and our hedging has performed as expected,” Prieskorn said.
Chad Myers, Jackson’s vice chair, observed that interest rates appear to be heading higher.
Increased investment market volatility might increase some components of hedging costs, but higher interest rates could help decrease other components of hedging costs and provide a helpful tailwind, Myers said.
Pictured: Laura Prieskorn, CEO of Jackson Financial
