Annuity FYI Blog

It looks like videos are becoming increasingly popular to help explain annuity basics.  After Annuity FYI announced earlier this month that we have a string of informative videos on our youtube channel, Allianz Life has come out with some annuity videos of their own.  According to company press release, “New Allianz Life Animated Video Series Demystifies Today’s Annuities,” they have released three informative videos on their website.  The videos, titled “The ABCs of Annuities,” each last less than five minutes.  Retirement Realities, Annuity Basics, and Annuity Myths and Truths are the three different videos.

Allianz Life’s ‘Reclaiming the Future’ study found that many Americans had a negative opinion about the word annuity, even though their ideal retirement product has all the benefits carried by annuities.  Many of their opinions are based on information they were given about annuities decades ago, so greater information is one of the top goals for the annuity industry in general.  They want a product that will save them from the risk of outliving their money.  Guarantees, safety and security are what retirees desire; Annuity FYI and Allianz Life hope their videos will show retirees to compare annuities because they can give them exactly those things.

Written by Rachel Summit

While they are looking for a huge increase in fixed annuity sales as well, MetLife already holds the top spot in variable annuity sales.  According to Annuity News Journal’s Steve Thompson, “MetLife Leads the Way in Variable Annuity Sales.”  They have made the customers better deals and while that coupled with a volatile market may hurt their short term earnings, they are not concerned about that for the long term.  The economic crisis of the past two years actually caused a decline in variable annuity sales because investors were seeking the comfort of a fixed annuity more often.  Now that investors are looking more towards their possible gains with variable annuities, fast growth could be a concern.  But MetLife is not worried about this growth because of their long history and sound business.

There have always been naysayers, saying that variable annuity products are too expensive and that they aren’t worth their guarantees against a stock market decline.  They have to change their tune after the ridiculous stock market losses that investors have incurred over the past couple of years.  Even if your variable annuity declined in value, your guarantees saved you from losing any of your principal investment.  That guarantee surely doesn’t seem so expensive anymore now that your retirement income is safe.  When you compare annuities, some even give you annual increases when the stock market is declining and most offer guaranteed lifetime income.  Variable annuities really do make sense for investors, even with any fees associated with the products.  MetLife’s booming variable annuity sales are proof positive.

Written by Rachel Summit

According to the National Underwriter article “NAIC Panel: History is Just History” by Allison Bell, history is unlikely to repeat itself in regards to annuities.  The National Association of Insurance Commissioners’ Life Insurance and Annuities Committee is working to revise the way that illustrations that compare annuities are shown.  They have what they call an “exposure draft” to revise the Annuity Disclosure Model Regulation.  An exposure draft is one step in the process of revising a model.  Comments will now be reviewed on the proposed revision regarding illustrations.

“Section 6″ is the proposed change and it would require illustrations to be clearly labeled and include a disclosure statement.  All costs, fees, riders, and optional features have to be included in the annuity illustration.  For example, illustrations of the non-guaranteed amounts related to fixed indexed annuities have to not only show the history of the past ten years, but also the best and worst ten year span over the past twenty years.  The NAIC has determined that it is not likely that history will repeat itself when you compare annuities.  Disclosures have to let investors know that while illustrations assume that history will repeat itself, it is likely that history will not.  Returns may be higher or lower than the illustrations show, but they probably won’t be the same.

In the article “How to Use Annuities for Retirement Income,” by Philip Moeller, the author offers 15 bits of information about annuities.  The U.S. News & World Report article confirms that the guaranteed lifetime stream of retirement income offered by annuities is more popular than ever in these uncertain economic times.  One benefit of annuities is the tax deferral savings if you don’t take your payments as an immediate annuity.  There is no limit to how much money you can put in an annuity, but there is for other investments like IRAs.  Annuity investors are essentially in a pool together, so they can get higher annuity rates.  While some may live very long lives and put a strain on the insurance companies, others may not.

It is crucial to comparison shop when looking at annuities.  You not only want to compare different annuities and those from competing insurers, but also compare equity linked CDs and other investments.  Be sure to include the safety of annuities to the risk you take with some other investments.  All annuities have fees and service charges attached to them because that is how the insurance companies make money.  Comparing the fees is another crucial step to take in your annuity research process.  This article says that annuities and Social Security are very similar in style.  Social Security is essentially a flexible premium deferred annuity because your payments vary based on your income and you wait to receive monthly payments until a later date, usually after retirement.

Annuities can be purchased through a lump sum payment or a series of payments over time.  Fixed annuities offer a fixed payment over time whereas variable annuities are invested in market subaccounts and can offer the potential for a greater return.  The fixed equity indexed annuity combines the fixed returns with some market upside potential and has become increasingly popular.  Annuities can be very complicated investments and are best purchased with the help of an expert.  Some investors worry that their money will be wasted if they die prematurely.  There is the option available to receive payments for a fixed period of time or even to last throughout your spouse’s lifetime.  With each guarantee you will be charged accordingly, so finding the best annuity for you can be like putting together a puzzle.  You’ll want to work with an expert to get the right options with the right payments and costs for you.

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.