Annuity FYI Visitor Blog

According to Karen Mracek’s article in the Des Moines Register, “Aviva’s sales (were) down in ‘09; but business is picking up.”  Aviva USA is headquartered in Des Moines and their parent company Aviva is based in London.  While the company showed an overall sales decline of 17% in 2009, their sales in the fourth quarter were up 14%, showing that they are indeed on the rise.

Aviva planned to reduce it’s annuity business after many companies were hit hard with losses in variable annuities during the most recent economic downturn.  However, the demand for their annuities was much greater than they had anticipated so they worked on updating their company goals.  While Aviva’s annuity sales declined 27% for the year, they showed a 44% increase in the fourth quarter of 2009.

The company believes that its customers have faith in Aviva as one of the stronger forces in the market and that is why they chose to do their annuity business with Aviva.  Aviva’s life insurance sales increased both for the year and dramatically in the fourth quarter.  They remain focused on profitably growing their business in annuities and other insurance products throughout 2010.

After President Obama’s Middle Class Task Force began the process of promoting annuities, the US Department of Labor (DOL) and the Treasury have put out a request for information, according to Money Management Executive’s “Treasury, Labor Dept. Issue RFI on Annuities in 401(k)s.  They are seeking out information on the benefits and drawbacks of using 401k annuities transfers to secure retirement income for Americans.  Since participants receive income in lifetime installments with annuities, the Treasury and DOL want to ensure that this form will work the best for the most people.

The American Council of Life Insurers was already excited about the Obama administration’s promotion of using annuities in different types of defined contribution plans.  They said in a statement that they are happy to provide information about the products to the Treasury and DOL.  The Insured Retirement Institute (IRI) will also be putting together annuity information for the departments to use in their research.  The government worries that an increasing number of retirees are opting for lump sum payments of their 401k or other plans.  With annuities, they purchase the product with that retirement money and receive a stream of income payments monthly that are guaranteed over a lifetime.  The departments’ RFI will help them gather more information for government recommendations.

The Obama administration is a big fan of annuities, according to “The unloved annuity gets a big hug from the president,” by Ron Leiber of The Boston Globe.  While President Obama did not end up discussing annuities in his State of the Union address last week, they are widely discussed in a report from his Middle Class Task Force.  Obama’s administration is promoting annuities as a vehicle to help Americans obtain a secure retirement.  In exchange for a lump sum of money at purchase, investors will receive a monthly income check for the rest of their lives.  Annuities are one of the few products to counter the longevity risk, running out of money while you are living.

The investors who were previously fearful of the risks of annuities may just take a second look at this unique product.  An immediate fixed annuity is the simplest form and the least “risky” from many viewpoints.  Variable annuities were derived from them and have their own risks and rewards.  Maybe the biggest fear investors had was losing the money if they died unexpectedly.  There are options available to add a spouse or other loved one onto your annuity to receive payments for a specified period of time if you die.  Inflation was another risk that worried investors, but with the option to purchase an annuity that rises with the consumer price index, you can avoid that as well.  President Obama may be issuing tax incentives for investors to purchase annuities for retirement along with requiring plan administrators to show employees the monthly payments they could receive with annuities to help promote them even more.

“FINRA Issues Guidance to Firms, Brokers on Communications with Public Through Social Networking Web Sites” is the latest news release from the Financial Industry Regulatory Authority (FINRA).  FINRA’s Regulatory Notice 10-06 is a question and answer document meant to provide recommendations to securities firms and brokers regarding social networking sites.  Facebook, LinkedIn, Twitter, blogs and other social networking sites are one of the most popular ways for companies to communicate with the public.  With their soaring popularity, issues arise regarding the credibility of the information being posted.  FINRA’s document stresses how important it is for companies not to mislead clients and to keep good records of their social networking postings.

Whether in the business of annuities, stocks, or another financial product, FINRA wants to ensure that firms and brokers have developed new procedures to handle social networking.  All regulations relating to the industry still need to be followed when using social networking for marketing and other communications.  There are actually technology systems being developed to help companies keep records and maintain accountability with social networking.  FINRA developed this document through their own research and experience along with a Social Networking Task Force representing 14 different firms.

According to “Sony Life Insurance forms joint venture with AEGON” on TradingMarkets.com, Sony Life Insurance Co., Ltd. and AEGON N.V. have made a financial partnership.  This joint venture was completed on January 27, 2010 and is valued at $55.88 million.  The companies will join forces to sell insurance policies under the combined name Aegon Sony Life Insurance Co.  The risks associated with variable annuities will now be reinsured by adding this second company to the mix.  Sony Life Insurance Co. is based in Japan and is a subsidiary of Sony Financial Holdings, Inc.  AEGON, located in Bermuda, is a life insurance and pension company based in the Netherlands.  The partnership consists of a 50:50 reinsurance on annuities and other life insurance products sold by the new joint venture.  Their trading symbols are AEG & SNYFY.  Keep an eye on those stocks to see what effect the companies’ joint venture will have.