Ameriprise offloads $1.7 billion in fixed annuities

Ameriprise offloads $1.7 billion in fixed annuities
Firm is trying to shift its business mix, freed up $200 million in capital.
MAR 20, 2019

Ameriprise Financial Inc. has offloaded $1.7 billion in fixed-annuity liabilities to Global Atlantic Financial Group, representing roughly 20% of the company's fixed-annuity account balances, the firm announced Tuesday. Commonwealth Annuity and Life Insurance Co., a Global Atlantic subsidiary, is reinsuring the annuities on the books of Ameriprise subsidiary RiverSource Life Insurance Co., which will retain account administration and servicing of the policies. In a reinsurance transaction, one firm contractually accepts the risk of another company. There are several reasons a company might enter into a reinsurance agreement. Ameriprise, for example, is shifting its business mix toward less capital-intensive lines and generated $200 million of deployable capital. (More: Insurers create pain points for advisers and clients) Other potential reasons include transferring certain types of risk, such as longevity or investment risk, exiting a certain business line, increasing the profitability of an insurance product, and reducing an insurer's exposure to large claims, according to the Society of Actuaries. Global Atlantic was the No. 4 seller of fixed annuities last year through the third quarter, having sold $5.6 billion in products over that period, according to Limra, an insurance industry group. A number of big annuity deals have happened recently. Great-West Life & Annuity Insurance Co. announced in January it is selling the bulk of its individual annuity and life insurance businesses to Protective Life for roughly $1.2 billion via a reinsurance transaction. Voya Financial Inc. sold more than $50 billion in annuities to three private-equity firms last year. Those assets are now held by a company called Venerable Holdings Inc. The Hartford Financial Services Group last year sold about $48 billion in annuity contracts to a group of six investors. Moody's Investors Services said in a research note late last year that it expects the trend of life insurers selling off legacy blocks of business to continue, given favorable economic conditions such as rising interest rates and a sizable inventory of legacy businesses.

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