Corebridge to Wall Street: We're Built for Volatility

News November 10, 2022 at 04:05 PM
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Kevin Hogan, the CEO of Corebridge Financial — AIG's newly separated life and annuity business — scoffed Wednesday that the kind of market volatility occurring so far this year would do much to Corebridge.

The recent rapid increase in interest rates has hurt some kinds of investment holdings and other values and sales at Corebridge, but, overall, the effects of rising interest rates will be great for the difference between what the company pays holders of life and annuity products and what it earns on its own assets, Hogan told securities analysts at the company's third-quarter earnings call.

"We're now seeing spread expansion for the first time in years," Hogan said.

Executives from Jackson, Equitable and American Equity gave similar assessments during their third-quarter earnings calls.

What It Means

Edward Toy, an insurance examiner, expressed concerns about some life insurers' understanding of how rising interest rates might affect investment portfolio cash flow.

Large, publicly traded life insurers say they are expecting to have plenty of cash they can use both to meet life and annuity commitments owed to your clients and pay dividends to their shareholders.

The Calls

Hogan said the list of levers AIG has to increase cash includes its hedging programs, the enormous flow of cash from its life and annuity operations, cutting real estate costs and updating its information technology systems.

Laura Prieskorn, the CEO of another major issuer, Jackson, noted that her company has $800 million cash at the holding company level, which is well above the company's minimum preferred level and enough to cover the cost of holding company expenses and shareholder dividends for two years.

"We see market volatility as a reasonable tradeoff for a very high return business," she said.

Mark Pearson, Equitable's CEO, emphasized that the company has prepared for the kinds of challenges facing markets today.

"We are showing the resilience we have designed for and we are spending our time focusing on what we can control," he said. "Our integrated insurance, investment, and advisory model mean we are uniquely placed to meet client needs in these times of great uncertainty."

Earnings

The third quarter ended Sept. 30.

Corebridge is reporting $2.5 billion in net income for the third quarter on $7.1 billion in revenue, up from $1.6 billion in net income on $5.5 billion in revenue for the third quarter of 2021.

Jackson is reporting $1.5 billion in net income for the latest quarter on $4 billion in revenue, up from $268 million in net income on $1.6 billion in revenue for the year-earlier quarter.

Equitable Holdings is reporting $273 million in net income for the latest quarter on $3 billion in revenue, compared with $672 million in net income on $3.6 billion in revenue for the year-earlier quarter.

American Equity is reporting $302 million in net income for the latest quarter on $492 million in revenue, compared with $142 million in net income on $543 million in revenue for the year-earlier quarter.

Pictured: Kevin Hogan. (Photo: Corebridge Financial)

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