Annuity FYI Visitor Blog

Jackson National Life Insurance Company had record sales and net income in 2009, according to Business Wire press release “Jackson(R) Announces Record Sales and Record Profit in 2009.”  With sales and deposits of $15.2 billion, Jackson saw an 8% increase from 2008.  Their net income of $670 million was a complete turnaround from a $1 billion loss in 2008.  Although the financial market was still a challenging one, Jackson recorded their highest sales and net income in the history of the company.  Variable annuities accounted for $10 billion of their 2009 sales, an increase of $3.5 billion from the previous year.  Jackson’s fixed index annuities sold $2.2 billion, which was an increase of more than 100% from 2008.  While traditional deferred fixed annuity sales decreased from 2008, they still accounted for $1.6 billion in sales.

Ratings from all four financial strength rating companies have remained strong over the past seven years.  A.M. Best rates Jackson an A+(superior), Standard & Poor’s and Fitch Ratings both rate them an AA(very strong), and Moody’s Investor Services Inc. gives Jackson an A1(good) rating.  These strong ratings are earned in part by Jackson’s top annuity sales rankings in 2009.  They had 5.9% of the market share in total annuity sales which put them in 4th place.  They were also 4th in new sales of variable annuities, giving them a market share of 8.1%.  A market share of 7.5% in sales of fixed index annuities gave Jackson their third 4th place ranking.  While they dropped in ranking for fixed annuity sales from 2008, it was a planned move to preserve the company’s capital.

In the Investment News article “Eight big changes that will reshape the annuity biz,” Darla Mercado summarizes a report from Jack Marrion of Advantage Compendium Ltd.  Fixed annuities will see their largest sales ever in the next ten years because of the 58 million Americans nearing retirement will be more receptive to the product’s value.  The 1st change we’ll see in the next ten years is a drop off in 1035 exchanges as it becomes more difficult to transfer from one annuity to another.  With the likely passage of Rule 151A classifying annuities as securities, marketing organizations (MOs) will phase out of existence.  The 3rd change will be a takeover by securities regulators ensuring suitability of annuity products.  The MOs that remain will have to have securities connections with broker-dealers or RIAs to stay competitive.

The 5th change that Marrion believes will happen when you compare annuities today and in ten years is that they will be seen much more in pensions as the planners get comfortable with the products.  Next, the way that guaranteed benefits are offered now will be overhauled with new options that are better for investors.  The 7th change is that Wall Street could be a large part of the annuity industry by getting involved through the teaming of investment firms and life insurers.  The final change will likely be a skyrocketing of fixed annuities sales in the next ten years.  As the products and their benefits evolve, Marrion believes that future retirees will be very open to fixed annuities.

In “Consumers’ Interest in Guaranteed Living Benefits Remains Strong in 2009, LIMRA Reports” from Insurance News Net, LIMRA’s 4th quarter findings are detailed.  When variable annuities offer the Guaranteed Living Benefit (GLB) rider, 84% of people elected to get the rider in the 4th quarter of 2009.  The four quarters prior to last, 89% of people elected for the GLBs.  The small decline is associated with a similar decline in the guaranteed living withdrawal benefit rider (GLWB), although the market share for GLWBs was still high.

LIMRA believes that the high number of investors opting for the security of the GLB is directly related to the shaky economy.  Even though insurance companies are trying to decrease the attractiveness of these low-risk riders, 80% of variable annuity contracts last year elected a GLB.  From the beginning of 2009 to the end, sales of variable annuities with GLBs attached increased by 41%, while total variable annuity assets increased by 21%.  New investors’ high rate of election of the GLB rider accounts for the larger increase of products with GLBs.  Many older annuities do not have the rider and are past the point of having a surrender charge so may leave the market.

FINRA has partnered with the United Way to spread financial education, according to FINRA’s news release “FINRA Investor Education Foundation and United Way Worldwide Announce Nearly $1.5 Million in Grants to Support Grassroots Financial Education Projects.”  Twelve United Way branches and community groups received the grants to help promote the FINRA Foundation and United Way’s new program, Financial Education in Your Community.  FINRA is working hard to help lower-income families become financially stable.  Through these education programs, someone who doesn’t even know what an annuity is may realize that the product is best for protecting their financial future.

Community groups have the ability to reach large numbers of people and relay information that can help them without bias.  During this tough economic time, these grants were given in areas hardest hit financially to help people become stable and look forward to their future.  Free educational programs will help working families and individuals on the road to financial stability.  They may learn about the best annuity rates to protect their retirement or simply how to balance their checkbook.  Community needs are across the financial spectrum.  These twelve grants were given to seven United Way branches located in Texas, Nebraska, Wisconsin, Pennsylvania, Connecticut, and New York.  The community groups receiving the other five grants are in Georgia, Arizona, South Dakota, and Tennessee.  FINRA believes that their help in financially educating the communities will make Americans self-sufficient and in charge of their futures.

In the PR Web press release “Annuity FYI Endorses FDIC Insured Equity Linked CDs as Preferable to Fixed-Indexed Annuities,” Annuity FYI’s endorsement of equity linked CDs is highlighted.  Equity linked CDs seem to be a better investment for most investors than fixed-indexed annuities.  The investment products are issued by banks and linked to particular stock market indexes.  The FDIC insurance associated with equity linked CDs ensures that your principal is guaranteed.  Even though they are not annuities, Annuity FYI believes that the similar benefits offered by both investment products makes them both an important part of investors’ portfolios.

Wells Fargo’s WISE US Index Equity Linked CD is Annuity FYI’s top pick for investors.  With a 6 year time frame, FDIC insurance, and market upside participation, Wells Fargo’s product is one of the best available.  There are other benefits to this particular product as well, including a high participation rate.  Annuity FYI likes equity linked CDs over fixed-indexed annuities because the latter tend to have high fees that are not in proportion to the benefits investors receive.  Some of the best benefits to equity linked CDs are their low cost, principal protection, and benefiting from market upswings.