Annuity FYI Blog

After a period of time where variable annuity products that were fee-based had a bad reputation, some of the biggest annuity companies are revamping the products.  Reuters Linda Stern discusses this new trend in her article “Analysis: New fee-only annuities aim to move upscale.”  More advisors are changing to fee-only practices now and insurance companies are making new products to attract them.  Retirement security has become more important than ever before during the past few years causing investors to change their willingness to pay more for better guarantees, like those offered with annuities.  More affluent investors tend to use fee-only advisors and they really appreciate the tax-deferral that comes with a variable annuity.

No-load, or fee-only, variable annuities are a very small portion of the total variable annuity market, but they are increasing yearly.  This year’s sales are expected to be 22% higher than sales in 2010.  Some of the big name companies introducing new fee-only variable annuity products include Allianz Life, AXA Equitable, Prudential, Lincoln National, and Sun Life.  In addition to the appeal of deferring taxes on all growth in the variable annuity, death benefits are another popular option for investors in these products.  Even fee-only variable annuities where you don’t pay commission are not right for everyone.  Depending on the mutual funds the annuities are tied to, your fees could be as much as commission on a basic variable annuity.  As with many annuities, getting past the preconceived notion the name carries can be the biggest hurdle for those who don’t understand all the benefits that come with a variable annuity.

Fixed annuity sales increased 6% in the first quarter of this year to a level of $18.9 billion.  The Annuity News Journal article; “Sales of Fixed Annuities are Making a Comeback” by Zachary Dristol, says that sales increased in all four types of annuities.  Book value annuities increased by 12%, moving to $8.6 billion in assets.  Market value adjusted annuities increased by 7% and income based annuities increased by .8%.  While there was only a minimal .2% increase in indexed annuity products, their increases over the past year or so have been so significant that the assets are still very high.

From the fourth quarter of last year to the first quarter of this year, book value annuity assets increased by 42%.  In the same time frame, annuity sales in general increased by 7%.  Beacon Research’s CEO said that increasing annuity rates during the first quarter were likely the reason for the fixed annuity sales increase.  In comparison to fixed and variable annuities, indexed annuity products lost some ground probably just due to seasonal changes.  After the financial crisis of 2008, the annuity industry worked hard to distance itself from AIG and be seen for their guaranteed retirement income again.  The top five annuity sellers in the first quarter were Western National, New York Life, Allianz, American Equity, and Aviva.

Allianz Life Insurance Company of North America had a $126 million operating profit in the first quarter of 2011.  This is based partly on strong sales increases of fixed indexed annuities and variable annuities.  Their asset base grew and the market remained stable, a good combination for profits to be strong.  Allianz Life, based in Minneapolis, reported this information in a company press release through Business Wire.  They currently manage $89 billion in customer assets, an increase of 12% from last year at this time.

Their sales premiums for the first quarter were $2.7 billion.  Their sales of fixed indexed annuities were 6% higher than in the first quarter of 2010, at $1.5 billion for the first quarter of 2011.  Their variable annuities saw a 37% increase from last year with sales of $958 million this year.  They started selling a fee-based, no-load variable annuity product through advisors who previously stayed away from annuities in general.  Allianz Life also made strides in their relationships with important firms by offering stellar customer service and higher levels of support.

Winning the 2010 Community Partner Award was also a big honor for Allianz Life.  The award is offered yearly by the Corporate Volunteerism Council of the Twin Cities.  Allianz Life received the award because of their volunteerism partnerships with Junior Achievement and BestPrep.  Allianz works with the non-profit groups to improve financial literacy in the community.  With increased sales of fixed indexed annuities and variable annuities leading the way for Allianz Life’s strong profits and a commitment to volunteerism, Allianz remains a frontrunner in the financial world.

According to Insurance & Technology’s Anthony O’Donnell, people say they will save more money for their future when they are shown a simulation of themselves in retirement age.  His article “New Life & Annuities Sales Tool: Aging Simulation” says that Allianz Life is likely to be one of the first financial companies using the tool.  Stanford University researchers are using virtual technology to basically scare young people into saving more money for annuity products and other investments in retirement.  Traditionally, insurers have used fear to get people to save more and purchase insurance products like life insurance and annuities.  It works because no one wants to die early and leave their family in a difficult position or retire without any way to pay their bills.

At Stanford, they are showing young people images of themselves at retirement age.  They have even gone so far as to show the avatars smiling when they save money and frowning when they do not.  In one of the experiments, the young people who saw their aging avatars said they would save twice as much money as those who did not see theirs.  By the end of this year, Allianz is hoping to have a similar yet simpler version for their advisors to use free of charge.  This may prompt more investors to turn to a death benefit annuity, offering survivors the monthly payouts that the deceased would have received.  Of course Allianz is hoping that they will see an overall increase in their sales as investors young and old worry not only about their retirement future but the future of those who outlive them.

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.