Annuity FYI Blog

LIMRA just released annuity sales results from the fourth quarter of 2010 and the total year results, according to Ruthie Ackerman’s article in the Financial Times. “Who Were the Top 20 Annuity Writers in 2010?” summarizes the top sellers.  Total annuity sales were published along with totals for sales of variable annuities and fixed annuities.  Of the top 20, half of them had sales increases over the previous year.  The top three sellers of variable annuities reached sales records, while 70% of the top variable annuity companies saw overall sales increases in 2010.

Prudential Annuities had both the most annuity sales and the highest sales for variable annuities.  They were number one with total annuity sales of $23.3 billion and variable annuity sales of $21.7 billion.  They were fourteenth in their sales of fixed annuities.  Allianz Life of North America sold the most fixed annuities, selling $7.1 billion.  They came in seventh in total annuity sales and thirteenth in variable annuity sales.

The top 20 companies accounted for 80% of total annuity sales, 93% of variable annuity sales, and 74% of fixed annuity sales.  Rounding out the top 10 companies in total annuity sales after Prudential were MetLife, Jackson National Life, TIAA-CREF, AIG Companies, Lincoln Financial Group, Allianz Life, New York Life, RiverSource Life Insurance, and ING.  Many of the top 10 annuity sellers also made the top list for variable annuities and fixed annuities.  In addition to those already mentioned, AXA Equitable and Nationwide Financial were in the top 10 for variable annuities.  For fixed annuities, AVIVA, American Equity Investment Life, and Great American were also in the top 10.  LIMRA’s report shows the entire top 20 list for each investment.

BBVA Compass is collaborating with Western National Life Insurance Company on a new fixed annuity product, according to Insurance News Net’s “BBVA Compass Announces Strategic Alliance with Western National to Launch Branded Annuity.”  The BBVA Compass Asset Annuity has a flexible-premium and is tax deferred.  It is only offered through BBVA Compass Insurance Agency, Inc., but is guaranteed by Western National, a leader in the fixed annuities market.  This marks the first time that BBVA Compass is both cobranding an annuity and managing some of the assets for the underwriting insurance company.

The Asset Builder Annuity should meet the needs of people nearing retirement that desire smart options for their money.  BBVA Compass Wealth Management will manage some of the assets for Western National, so both companies are very motivated to see what they believe is one of the best annuities succeed.  Western National is the top provider of fixed annuities through the bank channel and is known as a pioneer for new fixed annuity products sold specifically through banks.  Both companies share a commitment to providing their clients with innovative and customized annuity products that help meet their financial goals better.

According to Investment News’ article “NY Life tops 2Q list of fixed-annuities sellers” by Darla Mercado, fixed annuity sales increased from the first quarter of this year to the second quarter.  With sales of $19.4 billion in the second quarter, fixed annuity sales increased 18% from the first quarter but went down 30% from last year.  New York Life Insurance Co. sold $1.74 billion of fixed annuities to nab the top sales spot.  Allianz Life Insurance Co. of North America had the second largest fixed annuity sales of $1.68 billion.  With sales of $1.61 billion, Aviva USA had the third highest sales.  AIG’s subsidiary Western National Life had the fourth highest fixed annuity sales of $1.29 billion, while the fifth highest sales of $1.05 billion were from American Equity Investment Life Insurance Co.

Many believe that the widening spread between fixed annuity rates and Treasury rates is accounting for the increase in fixed annuity sales.  The wider spread also makes it more profitable for insurance companies to handle fixed annuity business.  While fixed annuities have been harder to sell recently, there has been quite an increased interest in fixed indexed annuity products because of their cap rates.  Variable annuities have also seen a sales increase, according to multiple reports.  The $34.4 billion of variable annuities sold this past quarter was an increase from $31.8 billion last year.  New variable annuities sold this quarter totaled $6.22 billion, up from $6.14 billion last quarter.  An increased interest in both variable and fixed annuity products means that investors are looking for secure ways to ensure that their income lasts for the remainder of their lifetime.

Prudential Financial Inc. and American International Group Inc. contributed to the United States’ largest variable annuity sales increase since 2007.  According to Bloomberg’s “Variable-Annuity Sales Rise 11% as Prudential, AIG Post Gains” by Inyoung Hwang, the $35.5 billion in sales was an increase of 11% for the second quarter of this year.  Prudential sold $5.3 billion of variable annuities to capture the top spot in sales.  This was a huge increase from their $3.38 billion in sales during the second quarter of last year.  Limra International believes that the market is showing signs of recovery since most of the top 20 companies had growth in their variable annuity sales.

After AIG was helped by the federal government, they increased their variable annuity sales 45% from $1.09 billion to $1.58 billion.  AIG was able to increase their operating profit by 17% after the profit from their U.S life insurance businesses quadrupled from last year’s profits.  The second highest sales of $4.5 billion belongs to MetLife Inc., although they experienced a very small decline from the same period last year.  Annuity rates and other factors contributing to the variable annuity sales affected the top companies differently.  The third and fourth place sellers were TIAA-CREF and Jackson National Life.  The industry is hopeful that this second quarter increase will continue into the future.

Prudential Financial Inc. and Jackson National Life Insurance Company have seen a large increase in their variable annuity sales through banks.  Prudential has seen the majority of their overall growth come from new channels of distribution, rather than their past sales channels.  Their second quarter variable annuity sales were $5.31 billion, which was an increase from $3.37 billion in the first quarter of this year.  While they saw a decline in their fixed annuity sales and after-tax adjusted operating income, Prudential is very happy with the prospect of growing their variable annuity business while they work to increase the other sales.

A combination of Prudential offering some of the best variable annuity guarantees and compensating advisers well has most likely led to this recent increase.  As the markets became more volatile and interest rates fell, many companies significantly reduced their variable annuity business, allowing Prudential’s Highest Daily variable annuity to top the sellers list last year.  Prudential has even reduced some of their benefits because of the low interest rates, changing their Highest Daily Lifetime 7 to the Highest Daily Lifetime 6 last summer.  Their pricing model is evaluated frequently and can be changed a few times a year if they find that necessary.

Prudential is open to purchasing other companies in order to expand their business, but stated that they have no definite plans to do so.  Their top goals would likely be to expand business in Japan and the U.S. retirement industry.  Selling the best annuities and other products in their marketplace always remains important, so any acquisition would have to follow their model.  AIG’s Star Life Insurance Co. Ltd., AIG Edison Life Co., and ING all seem to be possibilities for purchase by Prudential.