Annuity FYI Visitor Blog

According to Insurance News Net, “Fixed Annuities Make a Slow Recovery.”  Overall annuity sales stayed flat from March to April after a steady increase at the start of 2010.  The total variable and fixed annuity sales from banks in April was $3.3 billion.  Although that number was 26% lower than the $4.4 billion sold in April of 2009, the total annuity sales have increased significantly from their low point in January of 2010.

Fixed annuity sales increased 9% to $2 billion, almost doubling the total sales for January.  Sales were the highest since October of 2009, although still below last year’s April sales.  Traditionally, April bank annuity sales fall below March sales, so it is significant that this year was an exception.  Because fixed annuity rates are currently 6 basis points below CDs, the Kehrer-LIMRA Bank Fixed Annuity RateWatch thinks that sales in May will be down.

Variable annuity sales in banks were $1.3 billion in April, compared to $1.4 billion in March.  March sales however, were at the highest level for variable annuities since August 2008.  Investors shied away from variable annuities in part because their offerings seem to be less attractive than they were in the past.  $1.54 was sold in fixed annuities for every dollar of variable annuities sold through banks.

According to a company press release, Kansas City Life Insurance Company is stable and remains strong.  In “A.M. Best Affirms Ratings of Kansas City Life Insurance Company and Its Subsidiaries,” their financial strength rating of A (Excellent) and their issuer credit rating of “a” were affirmed.  Kansas City Life Insurance Company’s subsidiary, Sunset Life Insurance Company of America, also had its issuer credit rating of “a” affirmed.  The company’s subsidiary Old American Insurance Company had its outlook increased from stable to positive and its financial strength rating of B++ (Good) and issuer credit rating of “bbb+” affirmed.

Kansas City Life sells life insurance, variable and fixed annuities, and group accident, health and life insurance products.  Their fixed annuity sales increased significantly, which helped to offset a decrease in the sales of ordinary life insurance products.  A.M. Best recognizes a challenging environment ahead for Kansas City Life as market conditions decrease for fixed annuities and life and group insurance products.  Subsidiary Old American’s positive outlook is based on its recent new business sales and excellent opportunities for growth based on an increasing market of seniors.

There is an alternative investment out there for those seeking both high potential returns and annuity benefits, according to Investopedia’s “Are Equity-Indexed Annuities Right For You?”  Author Brigitte Yuille explains how the indexed annuity can work for more conservative investors.  The payments can be deferred until a later date or begin immediately just like traditional annuities.  Your return is linked to a stock market index like the Dow Jones Industrial Average.  Because of this, you may take on more risk than you would with a traditional variable or fixed annuity.

Equity indexed annuities have a minimum guaranteed interest rate, no matter what happens in the index to which they are linked.  While this rate is low, in an increasing stock market you will see higher gains than with a fixed annuity.  The market risk is different than with variable annuities because of this guaranteed minimum.  With any of these products, annuity rates depend on the time you purchased your product and the stipulations in your individual annuity contract.  With an indexed annuity, you have to look closely at the participation rate, any caps on the interest rate, and whether there is a spread, margin, or asset fee attached.

The guaranteed minimum returns for indexed annuities usually make them a good investment.  They also offer tax-deferred growth and an interest credit on the annuity’s anniversary date.  Two downsides that investors have realized are the inability to withdraw your money early without hefty penalties and abnormally high commissions on some products.  Speak with an expert to see if an equity indexed annuity is right for you.

As the deadline for the Treasury and Labor Departments’ request for information nears, the Insured Retirement Institute (IRI) asks for these government agencies to make it easier to implement 401k annuities.  From Darla Mercado’s Investment News article “Retirement industry group backs annuities in 401(k)s,” the IRI hopes that government plans will help 401k plan sponsors offer their employees’ annuities.  Americans are concerned about the state of social security, their traditional pensions have disappeared, and many have lost a tremendous amount of their 401k plans through market losses.  They need a form of guaranteed income in retirement now more than ever.

The IRI’s 41 page letter asked for a few things from the Treasury and Labor Departments.  They would like employer incentives to offer more annuities in employee retirement plans.  With simplified rules and limited administrative tasks for plan sponsors, the IRI believes that it will be easier for employers to offer guaranteed income from variable and fixed annuity products.  They’d also like more education and incentives offered to investors that don’t have pension plans.  While the IRI is an advocate for annuities, they believe that their requests from the government are for the greater good of Americans.  Guaranteed lifetime income in retirement will help retirees continue their way of life into retirement.

The Insured Retirement Institute (IRI), the non-profit organization promoting insured products like annuities, has introduced a retirement pyramid.  The pyramid aims to provide a secure retirement for its users by putting the largest amount of money into the largest or bottom tier and gradually decreasing the amounts as you climb the pyramid.  National Underwriter’s article “IRI Promotes Retirement Planning Pyramid” explains the strategy.  This week is the IRI’s National Retirement Planning Week of 2010, so they chose this time to promote the retirement pyramid.

This pyramid concept is meant for both consumers and professionals in the financial industry to use.  The three items making up the base of the pyramid are annuities, social security, and defined benefit pension income.  The second tier, called “long-term assets”, includes fixed annuity and other annuity income, 401k plans, real estate, and individual retirement accounts.  “Insurance” is the third tier encompassing Medicare, health insurance, life insurance, and long term care insurance.  The IRI’s top tier, “Investments”, is where they put stocks, bonds, mutual funds and certificates of deposit.