Annuity FYI Blog

With projected sales of more than $1 billion, MetLife’s Growth and Guaranteed Income (MGGI) variable annuities package is tops in its field.  According to Zachary Dristol’s Annuity News Journal article “Top Two Annuity Providers See Over $1 Billion in Variable Annuity Sales,” the companies selling the MGGI are pleased.  MetLife, Inc., one of the world’s top annuities, insurance, and benefits providers, sells the product along with Fidelity Investments, Inc.  Fidelity is a leading provider of retirement and financial products around the world as well.  MGGI’s variable annuities package guarantees lifetime withdrawals between 4 and 6% of your first premium investment.  The range depends on the investor’s age and their life expectancy.  This guaranteed lifetime benefit is locked-in at the individual rate established for each investor.

There are many factors contributing to the tremendous sales during a time when investors are being cautious.  Investors are searching for products that will guarantee them income during retirement, and annuities fit the bill.  The MGGI variable annuity not only offers this guaranteed lifetime income, but it also offers the potential for growth since the annuity rates are variable.  Americans are looking for investments that will protect them financially, because statistics have shown that more than 2/3 of them don’t believe they have adequate financial security.  Fidelity and MetLife are working together with this annuity product because they have found that Americans find some annuity products complicated to understand.  Together the companies are able to offer a simple product, which is being managed by Fidelity.  The costs are listed up front and are easy to understand.  The $1 billion in sales shows that modern investors are clearly interested in the MGGI.

Fidelity Investments Life Insurance Co.’s variable annuities have been added to FundQuest’s offerings, according to “FundQuest adds Fidelity VA to platform” by Jessica Toonkel Marquez of Investment News.  The Personal Retirement Annuity from Fidelity is the first Fidelity variable annuity to be offered to fee-based advisers through FundQuest, or any managed-account provider.  Andrew Stavaridis, FundQuest’s VP of national accounts, says that FundQuest has two other annuity products on its platform.  He also points out that Fidelity’s Personal Retirement Annuity costs the least of the three annuities.

The total expenses fee is just .35%, low compared to the 1.37% industry average.  There is not a commission structure associated with these variable annuities either, so Fidelity believes that the product is a good fit for fee-based advisers who do not operate business commission-based.  Fee-based advisers are less likely to show interest in variable annuities, so Fidelity is working hard to educate the advisers on the benefits of variable annuities.  They have several white papers in the works, including one to explain the tax efficiency benefits relative to a managed-account setting.  Fidelity is interested in getting the annuity into more managed-account platforms as well.

Fidelity Investment Life Insurance Company and its subsidiary, Empire Fidelity Investments Life Insurance Company have maintained their A+ financial strength rating with A.M. Best.  This information is from a press release by A.M. Best.  The superior strength rating and good issuer credit ratings are great news and mean that the company has continued earnings growth over the past five years, through a tumultuous market.

This is how A.M. Best says that Fidelity held strong in the industry:  “strong risk-adjusted capitalization, generally positive statutory and GAAP earnings, its focus on high credit quality and liquidity within its investment portfolio, prudent enterprise risk management practices and the competitive advantages it is afforded in marketing its life insurance and variable annuity products through the name recognition and branding of Fidelity Investments.”  Some moderate investment approaches helped Fidelity do better than its peers selling similar products.

When buying an annuity, it’s very important that the insurer providing the product is stable. Doing so minimizes the risk that you will lose part or all of your investment. Ratings are a good way to find out about a company’s strength. Here are TheStreet.com’s 10 strongest annuity insurers, as reported by Melissa Gannon:

1. Teachers Insurance and Annuity Assocation of America (TIAA-Cref)
2. State Farm Life Insurance Company
3. Country Life Insurance Company
4. State Farm Life and Accident Insurance Company
5. American Family Life Insurance Company
6. New York Life Insurance and Annuity Corporation
7. Massachusetts Mutual Life Insurance Company (MassMutual)
8. Pacific Life Insurance Company
9. New York Life Insurance Company
10. Fidelity Investments Life Insurance Company

On The Huffington Post, Dan Solin writes that immediate annuities are a less publicized yet suitable investment for retirees or those about to retire. He cites evidence that people who invest in an immediate annuity as part of their retirement portfolio are less likely to outlive their savings, a big concern for baby boomers.

Several companies offer immediate annuities, including:

• Vanguard
• Fidelity
• Charles Schwab
• TIAA-CREF