Equitable to Divest Portion of Variable Annuities
On October 28, 2020, Equitable Holdings, Inc. (EQH) announced that its flagship company, Equitable Financial Life Insurance Company (EFLIC), plans to divest about 13% of its variable annuity policy contracts business to Venerable Holdings, Inc. (VH). EFLIC held approximately $12 billion of general account policy reserves at 12/31/19 that related to the living or death benefit guarantees associated with this business, which was over half of EFLIC’s total general account reserves for variable annuities with guarantees of $23 billion as of 12/31/2019.
American Financial Group to cede portion of Fixed Annuity Business
On October 26, 2020, American Financial Group, Inc. (AFG) announced it had reached an agreement to cede $5.7 billion of fixed and fixed indexed annuities to Global Atlantic Financial Group Ltd. (GAFG). The deal was effective October 1, 2020.
AIG Announces Plan to Spin-off Life and Retirement Units
On October 26, 2020, American International Group (AIG) announced a plan to separate its Life and Retirement business from the remainder of the AIG organization, while AIG also announced that Peter Zaffino, AIG’s current President, will become AIG’s Chief Executive officer in March 2021 (succeeding Brian Duperreault). AIG is a major provider of individual life insurance and annuities in the U.S., through subsidiaries American General Life Insurance Company (AGL), United States Life Insurance Company in the City of New York (USLNY), and Variable Annuity Life Insurance Company (VALIC).
Understanding the Interest Maintenance and Asset Valuation Reserves
The NAIC introduced the Interest Maintenance Reserve (IMR) and the Asset Valuation Reserve (AVR) in 1992 in order to help life insurers better comply with the statutory accounting framework. Specifically, the reserves help insurers better abide by the concept of “conservatism,” which requires that life insurers use adequate accounting estimates in order to ensure policyholder obligations can be fulfilled. IMR and AVR deal with the issue that invested assets and certain liabilities may be subject to swings in value or even default, which may lead to volatile changes in surplus and may limit/distort the ability of an insurer to pay policyholders as needed. In essence, IMR and AVR help life insurers mitigate large/unforeseen fluctuations in statutory surplus. The NAIC summarizes each reserve below:
KKR & Co. Inc. to Acquire Global Atlantic Financial Group, Ltd.
Due to high client demand, ALIRT Research has put together the following bullet-points on the recently announced acquisition of Global Atlantic by KKR & Co. Inc. Currently there is little additional information available on this transaction, but we will make sure to update our client base as we learn more.
Jackson National Life Insurance Company Update: De-Merger from Prudential Plc About to Occur
In August 2021, Prudential Plc (PRUplc), parent company of Jackson Financial Inc. (JXN) and primary life insurance company subsidiaries Jackson National Life Insurance Company (JNLIC) and Jackson National Life Insurance Company of New York (JNLNY), announced its plan and timing for its planned “de-merger” of JXN.
China Oceanwide acquisition of Genworth Update
Last week, Genworth Financial Inc. (GNW) and China Oceanwide Holdings Group Co. Ltd. (CO) agreed to extend (again) the deadline for their proposed merger, to no later than September 30, 2020. This is now the 15th extension of the original agreement from October 2016. There are some new conditions that are part of this latest extension, which include that CO must demonstrate to GNW that it has $1.0 billion of funds available from its sources in Mainland China to fund the acquisition.
P&C Market Exposure to State Actions on Workers Compensation
Over the past several months, ALIRT Insurance Research has been tracking the Coronavirus pandemic’s impact on both the asset and liability sides of the U.S. property & casualty (P&C) insurance industry’s balance sheet.
U.S. Life Insurer Exposure to Less Liquid Bonds
Life insurers have long held a mix of assets with various liquidity profiles, from the very liquid to the nearly illiquid. Investments with the highest liquidity include investment grade bonds (especially government bonds), securities with a short remaining duration, and cash and cash equivalents . Less liquid securities include mortgage loans, below investment grade bonds, and alternative investments.
U.S. Life Insurer Exposure to Alternative (Schedule BA) Investments
Life insurance companies’ investment portfolios are heavily oriented to fixed income assets such as bonds (both “traditional” bonds and structured securities) and mortgage loans. These assets, together with policy loans and cash, comprised almost 90% of total life insurance industry investments in each of the last five years.