Date posted: July 31, 2011
American Equity Investment Life Holding Co. CEO Wendy Waugaman was interviewed in the Des Moines Register article “W.D.M. firm’s CEO talks of annuities, economic growth.” American Equity has the second highest sales of fixed equity indexed annuities, just above Aviva USA and behind Allianz Life. The company was started in 1995 and went from selling $150 million of annuities in 1997 to $2 billion in 2001. Their revenue is now up to $28 billion, largely based on sales of fixed equity indexed annuities. Investors look to annuities even more in volatile markets and for good reason. If you had purchased a fixed annuity in 1998 from American Equity for $100,000; the 2010 value would have been over $160,000. In comparison, the same investment in an S&P fund would have been worth just under $109,000.
These guaranteed interest rates make annuities very popular, especially as 401k annuities purchased with some of a retiree’s 401k plan. Waugaman answered questions about everything from annuity basics to the inner workings of American Equity. When asked how American Equity makes money from annuities, she says that it is similar to a bank loaning your money to other people while paying you interest. She says that they are growing faster than other annuity companies because of their excellent customer service to both agents and investors. After being asked about interest rates, she was honest and said that they are frighteningly low. She is hopeful that they will gradually increase so that they can offer higher immediate annuity rates and America can come out of the financial crisis. American Equity has hired 80 people over the last six months and they have been in every area of the business. American Equity is poised to retain their high position in the fixed equity indexed annuities market.
Date posted: July 28, 2011
According to Symetra’s press release, “Symetra Financial Reports Second Quarter 2011 Results,” the company had a significant year over year quarterly increase. Their second quarter net income of $59.4 million was a large increase over the second quarter of 2010′s $35.8 million. Their adjusted operating income of $49.8 million was also an increase over last year’s $41.5 million adjusted operating income. Group loss ratio increased in both the first and second quarter of this year. The account values for Symetra’s deferred annuities increased to $10.9 billion. Income annuities showed improvement based on mortality gains, while life earnings went down due to higher administrative costs and a lower return on assets. Symetra’s investment portfolio had net gains of $14.1 million after a loss in the second quarter of last year.
Symetra has been working on a lot of new products this year as well. The Symetra Edge Pro fixed equity indexed annuity is their updated SPL product. Symetra’s ‘Grow and Diversify’ strategy has been increasing the company’s assets based on expansion of their distribution channels and bringing new registered investments to the forefront. Variable annuities with lower costs because they don’t have living benefit guarantees are in increasing demand right now. Variable and fixed deferred annuities had an increase in adjusted operating income and set records in both total account value and fixed account value. Some of the company’s variable and fixed annuities numbers were down, based on lower annuity rates and interest rates in general right now. Single premium immediate annuities had a strong adjusted operating income lead by $4.9 million in mortality gains. Overall, Symetra is pleased with their second quarter results and is staying strong through difficult financial times.
Date posted: July 27, 2011
Ratings company A.M. Best has shown concern lately over marketplace happenings that may push them to downgrade some ratings. Due to the government’s arguing over the debt crisis and many weak European economies, the U.S. Life/Annuity sector may have its rating downgraded to negative from its current rating of stable. The Insurance Networking News article “Possible Revision to Rating Outlook for U.S. Life/Annuity Sector” explores the consequences of the ratings. Life insurance companies’ stability are being individually reviewed to see what happens to their risk-adjusted capitalization during times of economic stress. Some companies are more affected than others by the debt crisis and the falling European economies. Those companies who show a higher decline and those with a large amount of domestic and foreign sovereign credits may see their ratings decline.
The biggest stressors right now in the U.S. Life/Annuity sector are uncertainty in the global markets, higher volatility in the equity markets, a continuous weak real estate market, and unemployment coupled with low consumer confidence. Insurance companies are having a harder time increasing their revenues and earnings. Products like equity linked cds, fixed indexed annuities, and more are affected by the changing markets. While A.M. Best believes that raising the debt ceiling will help the financial markets’ stability in the short term, they think that other long term solutions are necessary. However, A.M. Best does acknowledge that many companies are being proactive to ensure their capital is protected, their portfolios are lower risk, and they are positioned for growth. If the annuity ratings outlook is downgraded, most insurers hope that their actions toward market protection will keep them positive.
Date posted: July 24, 2011
Some new registered annuities are being developed by Symetra Life Insurance, according to IBR’s “Symetra to develop registered annuities products.” Kevin Knull is their new senior vice president of registered investments. He was hired to help Symetra expand their portfolio of annuities. Their first focus is the development of variable annuity products with lower costs. There is a demand for variable annuities that cost less because they don’t have the living benefit rider guarantees attached. Advisors and investors alike are looking to solve problems with their variable annuity products and Symetra believes that Knull is right person to do this problem solving.
Knull previously worked as the CEO of consulting firm The Knull Group. They helped insurance companies and investment groups improve their product and sales practices. Before that, Knull worked at The Hartford Financial Services Group for nearly a decade. His boss will be the executive vice president of the retirement division, Dan Guilbert. He says that Knull has a wealth of knowledge working with the variable annuity, as well as with advisors and representatives. After working to improve their variable annuity offerings, Knull will likely look into the fixed annuities offered by Symetra and see what changes can be made to better suit their advisors and investors.
Date posted: July 22, 2011
In the Annuity FYI article, “From the Wreckage of the Financial Crash, Annuities Emerge as Market Safety Net,” Tristam Korten says that variable annuities singlehandedly saved many Americans’ retirement income. Two market disasters between the decade of 2000 to 2010 saw millions of Americans lose more than half of their retirement savings in the financial markets. The 2000 NASDAQ fall and the 2008 market collapse decimated stocks and other market investments. One man interviewed for the article purchased variable annuities for himself and his parents after his parents lost 2/3 of their money in the collapse of 2000. Just before the crash of 2008 he was able to secure their remaining retirement funds and his own through variable annuities.
Currently, 12% of the US population is 65 and older. But by 2050, almost 21% of the US population will be 65 and older. The strain that this will put on Social Security makes it an unreliable retirement source. Since the traditional pensions that our parents and grandparents received to finance their retirement are mostly gone, there is a gap for retirement income that is increasingly becoming filled by annuities. Your investment is usually insured from any loss and guaranteed a minimum rate of growth. Fixed annuities have your fixed rate of return guaranteed in your contract. Fixed equity indexed annuities link your return to a stock market index’s performance. With variable annuities, underlying market subaccounts determine your rate of return.
Many financial professionals who were not fans of annuities at some point, believe that they are now excellent investments. From the Director at Ohio National Financial Services to the director of financial security at the AARP, most financial experts agree that annuities should be a part of your retirement portfolio. The payments received from an annuity after your initial investment are much like a pension actually. Companies like Prudential and Ohio National have added additional annuity benefits to meet changing consumer demand. The article cautions that while there are more than 15,000 annuity products in the market, many of those are not the best investments. A financial advisor helped the man in the article grow back his own and his parents retirement savings through annuities. But investors need to spend a lot of time and work with a reputable financial advisor before jumping into annuities. The growth rate and principal protection of the right annuity products will carry many Americans through retirement.