Annuity FYI Blog

On the heels of ING’s negative press regarding variable annuities, their shares fell an average of 5% this week.  This information comes from Henry Steelman’s Annuity News Journal article, “Shares in ING Group Fell 5% Wednesday.”  ING is a huge financial institution all over the world covering banking and investment services as well as variable annuities and life insurance needs.  The downward trend in equities and lower annuity rates have taken a hit on ING’s variable annuities, so much so that the company expects a charge of $1.5 billion for its U.S. insurance unit.

The investment portfolios tied to their variable annuities have been under-performing and the company is paying out much more in premiums because of increasing life spans.  Moody’s lowered ING Group’s financial rating in the U.S. from A2 to A3 and Fitch lowered their ratings as well.  Investors were likely reacting to these financial ratings decreases in addition to the news.  Shares were down 5% in Amsterdam, then closed down 2%.  In the NYSE, ING’s American deposit receipt was down 8%, then closed down 3%.  The company plans to use contingent funding and review many aspects of their variable annuities going forward.  Many analysts are telling investors not to sell their shares of ING just yet.

Written by Rachel Summit

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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.

Prudential Financial Inc. and Jackson National Life Insurance Company have seen a large increase in their variable annuity sales through banks.  Prudential has seen the majority of their overall growth come from new channels of distribution, rather than their past sales channels.  Their second quarter variable annuity sales were $5.31 billion, which was an increase from $3.37 billion in the first quarter of this year.  While they saw a decline in their fixed annuity sales and after-tax adjusted operating income, Prudential is very happy with the prospect of growing their variable annuity business while they work to increase the other sales.

A combination of Prudential offering some of the best variable annuity guarantees and compensating advisers well has most likely led to this recent increase.  As the markets became more volatile and interest rates fell, many companies significantly reduced their variable annuity business, allowing Prudential’s Highest Daily variable annuity to top the sellers list last year.  Prudential has even reduced some of their benefits because of the low interest rates, changing their Highest Daily Lifetime 7 to the Highest Daily Lifetime 6 last summer.  Their pricing model is evaluated frequently and can be changed a few times a year if they find that necessary.

Prudential is open to purchasing other companies in order to expand their business, but stated that they have no definite plans to do so.  Their top goals would likely be to expand business in Japan and the U.S. retirement industry.  Selling the best annuities and other products in their marketplace always remains important, so any acquisition would have to follow their model.  AIG’s Star Life Insurance Co. Ltd., AIG Edison Life Co., and ING all seem to be possibilities for purchase by Prudential.

Aviva USA has a new executive vice president of insurance operations.  The company, based in Des Moines, is part of the fifth largest insurance group in the world, Aviva plc.  By introducing Christopher R. Welp into this position on August 30, Aviva plans to keep their company moving forward.  As one of the leading sellers of fixed indexed annuities and life insurance, Aviva USA has almost a million customers and employs 1,500 people in America.  Welp will be in charge of all of the insurance operations for Aviva USA, as well as help to develop and implement all company initiatives.

He will be involved with the company’s customer service, new life and annuity business, underwriting, administration, agency services and more.  Aviva USA is proud of their customer based company and believes that Welp’s history of excellent leadership throughout his career will help them meet their full potential in the United States.  They plan to grow their life and annuity business and always strive to evolve and make their customer experiences better.  Welp came from ING’s annuity business and has been a longtime resident of Iowa, participating in many organizations.  Aviva USA and Christopher R. Welp are excited about their new endeavor.

With $30 billion of sales in 2009, indexed annuities set a record for the highest sales of all time, according to “2009 Indexed Annuity Sales Set Record” from Insurance News Net.  The previous record from 2007 was beat by close to 10%.  Data representing 99% of the companies selling indexed annuities was collected by Annuity Spec’s Indexed Sales and Market Report.  While 4th quarter indexed annuity sales were down from the third quarter, sales levels were adjusting back to a normal level after their record highs.

Allianz Life remained in the top spot for total 2009 sales, as well as staying in the #1 carrier position in the market.  Their MasterDex X held its position as the top selling indexed annuity for the third quarter in a row.  Indexed annuities are tied to the markets, proving that their annuity rates were popular to investors.  After Allianz Life, Aviva moved up to the second spot in this annuities market.  The third, fourth, and fifth spots were occupied by American Equity, Jackson National, and ING.  In regards to bank and wirehouse 4th quarter distributions, Jackson National Life had the most indexed annuity sales.