Annuity FYI Visitor Blog

Investment News‘ Darla Mercado summarizes the variable and fixed annuity sales of 2009 in her article “Banks’ annuity fee income rose, FA sales fell in ‘09 3Q.”  Through the first three quarters of last year, bank holding companies saw the fee income from their annuity sales increase.  The sale of fixed annuities however, decreased in the third quarter due to their decline in popularity through 2009.  With $2 billion in fee income from variable and fixed annuity sales during the first three quarters of 2009, banks saw a 2.5% increase from the same time frame during the previous year.  Commissions increased 4% during the third quarter, according to a report of the top 922 bank holding companies.  Overall, 71% of the largest banks accounted for almost 95% of the total annuity commissions.

Wells Fargo held the top spot even though their income was actually down from the comparable period in 2008.  In second place was JP Morgan Chase & Co who also saw a decline from 2008, albeit a small one.  Regions Financial Corp. and Bank of America Corp. saw the largest gains in annuity fee income during the three quarter time period.  Western National Life was the largest seller of fixed annuities, despite the product taking an overall decline in the third quarter.  Three companies made their way onto the top 10 list of bank annuity sellers last year.  Jackson National Life Insurance Co., ING USA, and Hartford Life Insurance Company came onto the top ten list in 7th, 8th, and 9th places.  Annuities hold strong as important financial products, despite some declines in the fixed annuity sales.

In the Chicago Sun-TImes, David Roeder describes why there is “Little payoff seeking the next Google.”  He summarizes some of the latest financial news and goings-on.  Financial guys on TV always seem to be looking for the next company that will start from nothing and skyrocket to success, like Google or Apple.  But looking into the past 10 or so years, the companies with the highest expected growth potential actually had the worst annualized returns.  It seems that the lowest expectations in the stock market actually provide for the best investments.  There are some large companies whose stocks are being recommended by Chicago Investment banks like William Blair & Co.  Others are looking to invest in products that teenagers love: food & entertainment included.

Companies like MetLife, Hartford Financial, and AIG look to benefit from the Obama administration’s new recommendations.  They are looking to introduce rules that will push retirees to 401k annuities rollovers.  Currently only 2% of people with 401k’s convert them to an annuity in retirement.  Since annuities help to counteract the risk of outliving one’s savings, the government believes that this guaranteed income will help Americans through retirement.  Finance information is all over the news and has even seeped into the entertainment world.  A new documentary entitled “Floored” about the Chicago trading floors is playing in Chicago.  With the renewed public interest in financial freedom, information about stocks, annuities, and retirement is at the forefront of America’s publications.

In “Insurers Retool Annuity Offerings” by Leslie Scism of the Wall Street Journal, Scism describes how insurance companies are making changes to the variable annuities they offer to lower their risk while maintaining the products’ appeal to consumers.  The guarantees previously offered are the issue worrying many insurance companies.  While sales of variable annuities helped dozens of insurers grow exponentially over the past decade, the drop in the stock market brought the risk of these guarantees to the forefront.  Insurance companies have prepared their balance sheets for the impending lifetime income guarantees that will become payable based on the stock market’s high in 2007.  Two companies had to do this by taking federal bailout money.

But variable annuities are becoming popular again as their sales increased last quarter for the first time in over a year.  The new products are simpler but still offer most of the great benefits variable annuities are known to have.  Hartford has what they call a “derisked” VA offering and MetLife is coming out with their “Simple Solutions” product.  Although the products may have a higher cost to benefit ratio than variable annuities of the past, consumers are still receiving great annuity rates and benefits.  Consumers want to buy their annuities from companies that will stand the test of time and these changes are what will keep the insurance companies around.  Manulife’s John Hancock unit offers “AnnuityNote”, which has been on sale for a few months and is doing well while offering relatively low costs compared to their 5% and above lifetime annual payouts.  As advisers and consumers realize that these changes will benefit them with lifetime guaranteed income from an insurance company that will be around for their lifetime, variable annuities are sure to be purchased even more.

As Liam E. McGee takes over as Hartford Financial Services Group, Inc.’s CEO, he has tough decisions to make to turn the company around.  The National Underwriter’s Trevor Thomas describes the challenges and McGee’s basic plans in “Hartford’s McGee: Annuities Still On Menu.”  With a $1.2 billion net loss for the first half of 2009 and federal bailout funds needed to survive, Hartford has been challenged to make better decisions and turn things around.  McGee is hopeful that he can do just that, after running a division of Bank of America that is larger than Hartford.

Variable annuities will remain a part of Hartford’s wealth management business even with a recent decline in VA sales.  Hartford has recently put plans into place meant to more appropriately handle the risk and reward balance relating to their annuity products.  McGee believes that new and innovative annuity products are a way to help Hartford overcome its recent financial troubles.  Without divulging specifics, McGee plans to improve the ways that his company allocates capital through competitive products with balanced risks and rewards.

Deferred fixed annuity sales grew by close to 60% last year, according to an article by Janet Kidd Stewart in the Chicago Tribune.  It’s really no surprise as life expectancies continue to rise and many people’s life savings dwindle.  Northwestern Mutual Life Insurance Company actually has a calculator on their website to estimate your life expectancy, which can help determine how long you need to finance.  A one-time lump sum investment is paid out monthly starting at a date in the future with deferred fixed annuities.

Here are two examples of the updates being made.  The Hartford Life Insurance Company updated their Income Annuity last year by adding the ability to both choose the date payments begin and some option to change that date.  New York Life Insurance company added “The Changing Needs Option” rider onto its immediate annuity product.  This rider gives investors the option to add to their initial payment by up to 5 times if they need to in the future.  They can also decrease the amount by half; both do have a fee attached.  These updates are meant to help ensure that you do not outlive your finances.