Annuity FYI Blog

Investment News‘ Darla Mercado summarizes the variable and fixed annuity sales of 2009 in her article “Banks’ annuity fee income rose, FA sales fell in ’09 3Q.”  Through the first three quarters of last year, bank holding companies saw the fee income from their annuity sales increase.  The sale of fixed annuities however, decreased in the third quarter due to their decline in popularity through 2009.  With $2 billion in fee income from variable and fixed annuity sales during the first three quarters of 2009, banks saw a 2.5% increase from the same time frame during the previous year.  Commissions increased 4% during the third quarter, according to a report of the top 922 bank holding companies.  Overall, 71% of the largest banks accounted for almost 95% of the total annuity commissions.

Wells Fargo held the top spot even though their income was actually down from the comparable period in 2008.  In second place was JP Morgan Chase & Co who also saw a decline from 2008, albeit a small one.  Regions Financial Corp. and Bank of America Corp. saw the largest gains in annuity fee income during the three quarter time period.  Western National Life was the largest seller of fixed annuities, despite the product taking an overall decline in the third quarter.  Three companies made their way onto the top 10 list of bank annuity sellers last year.  Jackson National Life Insurance Co., ING USA, and Hartford Life Insurance Company came onto the top ten list in 7th, 8th, and 9th places.  Annuities hold strong as important financial products, despite some declines in the fixed annuity sales.

In the Chicago Sun-TImes, David Roeder describes why there is “Little payoff seeking the next Google.”  He summarizes some of the latest financial news and goings-on.  Financial guys on TV always seem to be looking for the next company that will start from nothing and skyrocket to success, like Google or Apple.  But looking into the past 10 or so years, the companies with the highest expected growth potential actually had the worst annualized returns.  It seems that the lowest expectations in the stock market actually provide for the best investments.  There are some large companies whose stocks are being recommended by Chicago Investment banks like William Blair & Co.  Others are looking to invest in products that teenagers love: food & entertainment included.

Companies like MetLife, Hartford Financial, and AIG look to benefit from the Obama administration’s new recommendations.  They are looking to introduce rules that will push retirees to 401k annuities rollovers.  Currently only 2% of people with 401k’s convert them to an annuity in retirement.  Since annuities help to counteract the risk of outliving one’s savings, the government believes that this guaranteed income will help Americans through retirement.  Finance information is all over the news and has even seeped into the entertainment world.  A new documentary entitled “Floored” about the Chicago trading floors is playing in Chicago.  With the renewed public interest in financial freedom, information about stocks, annuities, and retirement is at the forefront of America’s publications.

In “AIG Learns It’s All in the Name” from FinancialPlanning.com, we learn that taxpayers’ bailout dollars have helped AIG bounce back faster than many expected.  American International Group is one of the few insurance companies that has successfully come back from the financial mess it was in through creative branding.  It’s subsidiary was previously named AIG Annuity Insurance Co. but was switched this year to Western National Life Insurance Co.  That distancing from the tarnished brand name of AIG helped lead Western National to be the third quarter’s number one seller of fixed annuities through banks.  New York Life Insurance Co. does still hold the number one spot for the year, but believes it lost it’s third quarter spot due to low interest rates in the market.

Western National has been able to attract more annuity clients because they are offering higher interest rates than competitors.  They do this by making agreements with banks to lower the commissions they pay to the banks.  In turn, the banks receive more annuity clients after a couple years of clients shying away from the products.  Banks believe that the volume of fixed annuity customers they receive will make up for the lower commissions they are being paid by Western National.  While some other insurance companies may not think it is fair that AIG’s Western National is using government bailout money to cushion it’s higher interest rate offerings, that was part of the purpose for the bailout.  Companies should use that money in a way that they will become successful again and repay the bailout money to taxpayers.

According to a press release by Beacon Research, fixed annuity sales estimates in the U.S. for the first quarter of this year were $34.9 billion.  The Fixed Annuity Premium Study comprised of data from 53 insurance companies, which account for about 86% of this market.  This sales number was not only the highest since 2003 when the study was first completed, but was also 78% higher than the same quarter last year.

The four types of annuities assessed ranked in sales high to low starting with book value annuities, indexed, market-value adjusted, and immediate.  All 4 showed increases from last year’s 1st quarter, while only book value annuities increased from the prior quarter.

The top ten sales leaders were MetLife, New York Life, Aviva USA, RiverSource Life, AEGON/Transamerica Companies, AIG, Allianz Life, Jackson National Life, Principal Financial Group, and USAA Life.  You can check out more of the study information in Beacon Research’s press release.  Contact one of our experts with any questions about fixed annuties from the top ten companies and more.

In Kiplinger’s Personal Finance magazine, Kimberly Lankford advised individuals with annuities or life insurance policies from AIG to sit tight. Despite the well-publicized struggles of its other divisions, the life insurance subsidiaries are mostly unaffected and currently have an A rating from A.M. Best (under review with negative implications).  State capital requirements mean that AIG has enough money in reserve to pay claims.

Variable annuities from AIG (e.g. the Vanguard variable annuity) are also secure, says Kimberly, since they are invested in mutual funds through entirely separate accounts. Annuities will be paid out normally.

If you abandon your AIG annuity or insurance policy, you may be subject to surrender penalties, cancellation charges, and/or higher premiums (lower annuity rates). In addition, the agent that sells you the new policy might be paid an additional commission if you switch.