Date posted: November 23, 2010
Prudential Financial Inc., MetLife Inc., Jackson National Life, and TIAA-CREF were the top four sellers of variable annuities through the first three quarters of this year, according to The Wall Street Journal. “Variable Annuities’ Giants Grow,” by Leslie Scism and Erik Holm, points out that the four top sellers accounted for nearly half of all variable annuity sales. With 48% of the market share occupied by these four insurers according to LIMRA International, there was a significant increase from 2008 when the top four sellers accounted for 36% of the market share.
As you compare annuities like these that guarantee retirement income, insurance companies have been updating and changing their products to adapt to a new financial marketplace. Overall sales of variable annuities were up 8% through the first three quarters of this year. That increase over last year made for sales of $102.8 billion. Insurers have made changes to their variable annuities to make sure that they are profitable while remaining relevant to financial advisors and others who sell them to investors.
While variable annuities cost more for the benefits they give out than before the financial crisis of 2008, they are still being sold in near record numbers because of the perceived value from investors. They are similar to mutual funds but offer tax advantages. Many investors like to take advantage of the minimum guaranteed benefits given even when funds don’t perform as expected. Whether purchased as immediate annuities or deferred until a later date to take advantage of tax savings, investors remain very interested in variable annuities to fund their retirement.
Date posted: November 16, 2010
Insurance News Net’s article “Indexed Annuities Post Record 3Q Sales” summarizes annuity sales information collected from LIMRA’s annuity research department. With indexed annuity sales of $8.7 billion, this safe investment product is seeing quite the surge in popularity. The third quarter sales were an increase over last year’s third quarter of 16%, and an increase of 6% over the second quarter of this year. A LIMRA spokesperson credits the increased demand for indexed annuity products to a volatile equities market and lower fixed annuity rates. He says that indexed annuities now account for 41% of the entire fixed annuity market. Some conservative investors are opting for the indexed annuity now over the traditional fixed annuity they may have bought a few years ago.
Annuity sales overall increased by 1% from last years’ third quarter, but went down 2% from the second quarter of this year to total $56.1 billion. Variable annuity sales followed the same trend with a 2% decrease from the second quarter, but a 9% increase in sales from the third quarter of 2009 to equal $34.9 billion. Fixed annuity sales have decreased 31% this year to date, but that is following a record sales year in 2009. Their third quarter sales decreased 1% from last quarter and 10% from the third quarter of 2009 to $21.2 billion. Overall, annuity sales have remained steady this year, even with a still volatile marketplace. As investors looking for lower risk opt more for indexed annuity products, the insurance companies selling annuities will shift their focus a bit as well.
Date posted: November 13, 2010
According to Reuters’ “Analysis: Annuity persistency raises risks for insurers” by Ben Berkowitz, investors are holding onto their annuities longer. While the short term effects of this trend are good for insurance companies, it increases their long term risk once all of the guaranteed benefits must be paid. Insurers like Genworth, MetLife, and Hartford Financial refer to the trend as “persistency” and all three say that they have seen an increase. It makes sense for investors to hold onto their variable annuity products longer, based on lower interest rates and a relatively low stock market. New policies are also being sold at a rapidly increasing rate. MetLife saw a third quarter increase for their variable annuity sales of 35%, totaling $4.7 billion. The guaranteed living benefits associated with variable annuities ensure a stream of income for investors and that is currently more beneficial than anywhere else they would put their money in the market.
As the risk to insurers has increased, they have made some changes to protect their future stability. Some companies have increased prices or restricted certain asset allocations. Others have changed hedging, taken away some features, and even updated the way they perform their accounting. Ameriprise Financial will now change its amortization for variable annuities to longer than 20 years as people hold onto their products longer. MetLife says that they don’t have any plans currently to extend their 20 year amortization schedule, but if the trend continues, other companies might follow Ameriprise’s accounting change lead. Time will tell how the market changes and how investors react with their variable annuities.
Date posted: November 12, 2010
The editors at Retirement Income Journal put together “The Bucket,” an article summarizing Financial Engines’ third quarter financial results. The investment management company which gives retirement planning advice to employees saw a 45% increase in the assets they manage and a 31% increase in revenue this quarter over the third quarter of 2009. The article highlights the successes of the insurance companies that Financial Engines works with.
Jackson National Life sold more variable annuities in the first three quarters of this year than they have in any whole year in the past. Their Perspective II showed large sales increases and was the top selling variable annuity in the retail sector for the third year in a row. Although their sales of fixed indexed and fixed annuities declined slightly due to lower interest rates, Jackson maintains a strong presence in the sales of both products which helps preserve their capital.
Allianz Life Insurance Company of North America had an increase of 36% in their sales of fixed indexed annuities and a 275% increase in variable annuity sales over the third quarter of last year. The Inflation Protector variable annuity from Penn Mutual, blogged about in a previous post, is expected to be a hot new product in the marketplace. American Equity Investment Life Holding Company showed an increase in annuity sales, based on what they believe is an increased demand for safe investments to counteract a volatile market.
This brief summary of the companies working with Financial Engines gives a positive outlook to their working relationships with investors and employees. Much more can be found in the original article detailing even more changes that have occurred this third quarter of 2010.
Date posted: November 10, 2010
Thanks to an increase in equity indexed annuities sales, American Equity Investment Life Holding Co. had a third quarter increase in their net income. The Associated Press article, “American Equity posts $20.5M in 3Q net income,” is from Bloomberg Business Week. After a net loss last year at this time, American Equity is pleased to report the profitable net income of $20.5 million for the third quarter. Although their 33 cents per share was less than Wall Street anticipated for them, an increase is great especially after last year’s third quarter loss of $3 million and 5 cents per share.
Their operating income fell slightly to $27.6 million, down from $28.2 million from this time last year. That lowered their per share price to 45 cents from 47 cents. Wall Street had anticipated 46 cents per share, so while the actual number was less it wasn’t too far off. Because the market is still volatile and annuity rates are steady compared to lower rates being offered on competing products, American Equity believes that investors are turning more to their safe products. Their quarterly revenue was up 12% at $383.5 million and their net investment income jumped to $260.5 million from $241.5 million. American Equity out of Des Moines, Iowa is pleased with their third quarter numbers.