Annuity FYI Blog

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.

Allianz Life Insurance Co. of North America introduced a new preferred distribution program last week that those left out of the program are unhappy with.  According to Darla Mercado of Investment News in the article “Allianz Preferred perks strike nerve with agents,” agents and marketing groups who are not included in Allianz Preferred are worried that they will lose clients or agents within their groups.  The program gives extra support to top sellers of Allianz’s fixed equity indexed annuity products.  Allianz Preferred offers these top field marketing organizations some special products and more support and in turn, they allow Allianz increased oversight of their organization.  Allianz says that they want to make sure the companies who represent them best are thriving and getting the resources to improve in the marketplace.

The annuity market could see some changes because of Allianz Preferred, since agents and marketing groups could look specifically for FMO’s who are part of this preferred group.  Some critics of the program think that the $75 million of Allianz annuities that FMO’s must sell to be in this preferred group is too high.  Others worry that compliance officers hired by Allianz to look into the materials related to competitors’ annuities may not be in the best interest of the consumer looking to compare annuities.  Allianz is already the top indexed annuity seller with 21% of the market and this move may make it nearly impossible for its top competitors, like American Equity and AVIVA USA, to catch them.  The 25 or so organizations who will be part of this preferred program are excited for all of the benefits, and even for the opportunity to recruit agents whose organizations are not eligible.

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.

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.

Following in the footsteps of LV= and Living Time, Aviva and Just Retirement are introducing their own fixed-term annuity products this year.  This is according to Tom Selby’s article”Fixed-term annuity launches for Aviva and Just Retirement” in Money Marketing.  Aviva hopes to release their product during the second quarter of this year, while Just Retirement is looking to release their annuity sometime this summer.

The fixed-term annuity market is growing, for both deferred and immediate annuities.  Darren Dicks, the head of retirement for Aviva, says that the company is on track with the paperwork and other things they need to complete by their anticipated launch date.  The director of external affairs for Just Retirement, Steve Lowe, says that they have a number of new products they plan to bring to market, including fixed-term annuities.

MetLife is distributing Living Time’s annuity product and plans to introduce their own fixed-term annuity sometime in 2012.  LV= introduced their protected retirement plan last February, a fixed-term annuity that directly competes with Living Time’s product.  Partnership is another company looking to see if this product will be one of the best annuities in the future.  Steve Lewis of Retirement Partnership thinks the increased competition is great and believes 2011 could be the year for fixed-term annuity products.