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Chris Blunt (Photo: American College)

Life Health > Annuities

Annuity Issuer CEO Names DOL Fiduciary Rule Winners and Losers

By Allison Bell

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What You Need to Know

  • Blunt thinks the new DOL requirements could help big distributors get bigger.
  • He doubts that new requirements will do anything good for ordinary retirement savers.
  • He is not rushing to offer annuities inside retirement plans.

The new U.S. Labor Department fiduciary standards for retirement rollover advice could help stronger independent marketing organizations crowd out competitors, according to the leader of a top annuity issuer.

Chris Blunt, the chief executive officer of F&G Annuities & Life, talked about the impact of the department’s new Retirement Security Rule regulation effort last week, during a conference call with securities analysts. The Labor Department itself suggested that IMOs could help agents and brokers compare a wide range of annuities, along with other investment options, and keep compensation differences from influencing their recommendations.

Blunt predicted that, if the new requirements survive court challenges and take effect as written, they could help the more sophisticated IMOs stand out, grow and lock in market share.

“This may force independent agents to affiliate with one IMO, versus multiple IMOs,” Blunt said.  “The best players look at this and say, ‘We can build some nice moats for ourselves.”

What it means: If Blunt is correct, the new sales standards could shift the center of annuity distribution power toward big distributors, and away from smaller distributors and financial professionals.

Blunt has a better window on the impact of the new Labor Department regulations than most, because he’s the head of the company that ranked eighth in terms of U.S. individual annuity sales in 2023, with $9.8 billion in sales, according to LIMRA sales survey data.

Blunt’s views: Blunt spoke to the analysts during a call F&G held to go over results for the first quarter with the analysts.

He acknowledged that the new DOL regulations will increase F&G’s compliance costs. “It’s annoying,” he said.

But he suggested that the regulations will have little or no effect on F&G’s sales or earnings, and he noted that the Des Moines, Iowa-based company now gets about 85% of its sales from financial professionals who are licensed to sell securities.

Those financial professionals are already operating under the U.S. Securities and Exchange Commission’s Regulation Best Interest sales standards, Blunt said.

Right now, he added, the real constraint on annuity sales is the supply of capital, not the sales pipeline.

“We have more sales opportunity than capital right now,” he said.

But Blunt suggested the new DOL approach will be hard on agents and brokers who want to help ordinary people prepare for retirement.

“We do worry that it will discourage agents from serving middle-market clients,” he said. “I think that, unfortunately, it would be disproportionately impactful to agents that are serving the middle market.”

In-plan annuitization: Some of F&G’s competitors have started programs to offer annuitization options inside 401(k) plans, or provisions that convert a 401(k) plan account directly into a stream of lifetime income.

F&G now works with employers by selling the kinds of big group annuities that an employer can use to transfer defined benefit pension plan risk to an insurer, but it has not yet entered the in-plan annuity arena.

F&G is watching the in-plan market closely and could eventually jump in, Blunt said.

“I do think the products can have a big impact for society,” he said.

For now, he said, F&G is not participating in that market because it believes that persuading employers to adopt the programs may be difficult; upgrading the plan recordkeeping enough to support the programs is difficult and expensive; and the programs will end up creating huge numbers of small accounts.

“I would also think that a carrier with a big, recognized brand name probably will have a little bit of a leg up there,” Blunt said.

The earnings: F&G reported $116 million in net income for the first quarter on $1.6 billion in revenue, compared with a $195 million net loss on $1.1 billion in revenue for the first quarter of 2023.

Excluding the effects of reinsurance arrangements, assets under management increased to $58 billion, from $45 billion.

Total retail annuity sales increased to $2.8 billion, from $2.7 billion, and indexed universal life sales increased to $42 million, from $37 million.

Chris Blunt. Credit: The American College

Allison Bell

Think_Allison

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