Competition Heats Up in Retail Annuity Market

Life insurers are still bragging about their annuity operations — but some are mentioning concerns about the effects of competition on profit margins.

Ellen Cooper, Lincoln Financial’s CEO, today acknowledged that increased competition held down sales of the company’s fixed annuities and registered index-linked annuities, or RILAs, in the first quarter.

Cooper emphasized in a conference call with securities analysts that sales have been high and that the company has taken steps to add distribution partners and update products. But she also emphasized that the company wants make sure the annuities it sells are profitable.

“When we are focused on annuity sales, we are also focusing on capital efficiency and on ensuring that we are achieving our risk-adjusted returns,” Cooper said during the call, which Lincoln held to go over first-quarter earnings.

What it means: Financial professionals with clients who are mulling whether to buy annuities might want to encourage them to mull quickly.

If annuity issuers decide it’s time to think less about sales and more about risk management, they could start to lower rates or make some product provisions less generous.

The backdrop: Executives from other insurers addressed the topic of annuity market competitive pressure by talking in their own earnings calls about their companies’ ability to handle the competition.

At Equitable, executives said Wednesday that fierce competition is expanding the U.S. retail annuity market.