Stock Market Volatility Could Hammer Some Annuity Issuers: Analysts

The takeaway: If your clients have any interest in products that protect account value from fluctuations in the stock market, they should consider buying the products while the products are still on the shelves.

‘Headwinds’

On a sailboat, a tailwind is a helpful wind that comes up from the rear, fills the sails and makes the boat go fast.

A tailwind is a wind that hits the boat head-on and makes the boat zigzag to get anywhere.

Although the recent increase in interest rates is mostly a tailwind for life and annuity issuers, by increasing the rates they got on their trillions of dollars in corporate bonds, rising rates can also hurt the fee revenue that insurers get from managing fixed income portfolios for outside clients, the analysts say.

The analysts note that the value of many non-U.S. currencies fell when compared with the dollar in the second quarter, and that exchange rate fluctuations could affect insurers with big international operations, such as Aflac, MetLife and Prudential.

COVID-19

The number of COVID-19 deaths fell to about 32,000 in the second quarter, from 156,000 in the first quarter.

That could be a big help for insurers with large amounts of life insurance business on their books, but it likely won’t affect how investors see life, health and annuity issuers, because investors were already assuming that pandemic mortality would fall sharply in the second quarter, the analysts say.

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