Annuity FYI Visitor Blog

Since Annuity FYI has added equity linked CD investments to our recommendations, it is important to explain how the recommendations come about.  Equity linked CDs have a lot of the same benefits as annuities so they can be easily compared.  Those benefits include principal protection, market upside participation, and a low cost.  Annuity FYI believes that an equity linked CD can be an important part of retirement portfolios.  They are preferred over fixed/equity-indexed annuities because of their low cost, short time commitment, and the fact that they are FDIC insured.

The equity linked CD criteria used to evaluate the products and companies selling them is straightforward.  A participation rate with the corresponding index, for example the S&P 500, higher than 90% is preferred.  A low spread of 1% or less also indicates a preferred equity linked CD.  Annuity FYI looks for equity linked CDs without a performance cap rate and with a maturation period of six years or less.  When evaluating the insurance company selling the equity linked CD, their customer service skills, company management, and the ease in which you can access your account are all taken into consideration.  Contact an expert for more information regarding equity linked CDs.

According to Darla Mercado of Investment News, insurance companies have new targets in their sight to increase sales of variable annuities.  Mercado’s article “Insurers target new channels to help boost VA sales” talks about the insurance companies’ plans.  At the Insured Retirement Institute’s marketing conference in New York this week, the panel spoke of their need to change direction due to the financial crisis.  Insurers are looking to reach out to different types of potential customers and advisers in previously uncharted territories.

One of the biggest groups of people who could potentially benefit from variable annuities are 401k participants and managed-money programs.  Insurers hope that pre- and post-retirees will make 401k annuity transfers and purchase variable annuities from them.  The purchase of annuities will guarantee a lifetime income stream throughout retirement.  Some new products have also come out of this need to advance with the changing economic climate.  Lincoln Financial is introducing a long-term-care rider with both their fixed and variable annuities.  Updates and changes from insurance companies are meant to help consumers in the long run.  A little competition can breed great ideas.

According to Karen Mracek’s article in the Des Moines Register, “Aviva’s sales (were) down in ‘09; but business is picking up.”  Aviva USA is headquartered in Des Moines and their parent company Aviva is based in London.  While the company showed an overall sales decline of 17% in 2009, their sales in the fourth quarter were up 14%, showing that they are indeed on the rise.

Aviva planned to reduce it’s annuity business after many companies were hit hard with losses in variable annuities during the most recent economic downturn.  However, the demand for their annuities was much greater than they had anticipated so they worked on updating their company goals.  While Aviva’s annuity sales declined 27% for the year, they showed a 44% increase in the fourth quarter of 2009.

The company believes that its customers have faith in Aviva as one of the stronger forces in the market and that is why they chose to do their annuity business with Aviva.  Aviva’s life insurance sales increased both for the year and dramatically in the fourth quarter.  They remain focused on profitably growing their business in annuities and other insurance products throughout 2010.

According to “Immediate annuities, whole life are likely to gain favor,” Darla Mercado of Investment News says that as baby boomers age they are looking for insurance products that offer them income.  As these baby boomers approach retirement, they want reliable streams of income that won’t fluctuate with the markets.  Immediate annuities offer the benefit of a guaranteed cash flow to cover necessary expenses.  Since the amount of the income stream is known, they can count on this money to pay their bills and feed them.

Whole life insurance policies are also gaining steam because financial advisers are trying to find a fixed-income alternative that will still perform well for their clients in this environment of low interest rates.  The “10-pay” whole-life policies are popular for clients under the age of 45.  Many companies offer this product which requires clients to pay all of their premiums within 10 years.  It can reduce out-of-pocket costs for term life insurance and allows clients to pay for a much shorter period of time.

The current insurance trend is to use the annuity in the supporting but still crucial capacity of guaranteeing income in the future.  Variable annuities have overtaken the fixed annuity in popularity, but they seem to swap places every year or so depending on the markets.  Demand is out there for new developments in the variable annuity industry and they are slowly creeping in.  Some of the benefits of fixed annuities are being added to variable annuities, as are aspects of the deferred immediate annuity.  One thing is for sure in the insurance industry; products and popularity are ever-changing.

In “AIG Learns It’s All in the Name” from FinancialPlanning.com, we learn that taxpayers’ bailout dollars have helped AIG bounce back faster than many expected.  American International Group is one of the few insurance companies that has successfully come back from the financial mess it was in through creative branding.  It’s subsidiary was previously named AIG Annuity Insurance Co. but was switched this year to Western National Life Insurance Co.  That distancing from the tarnished brand name of AIG helped lead Western National to be the third quarter’s number one seller of fixed annuities through banks.  New York Life Insurance Co. does still hold the number one spot for the year, but believes it lost it’s third quarter spot due to low interest rates in the market.

Western National has been able to attract more annuity clients because they are offering higher interest rates than competitors.  They do this by making agreements with banks to lower the commissions they pay to the banks.  In turn, the banks receive more annuity clients after a couple years of clients shying away from the products.  Banks believe that the volume of fixed annuity customers they receive will make up for the lower commissions they are being paid by Western National.  While some other insurance companies may not think it is fair that AIG’s Western National is using government bailout money to cushion it’s higher interest rate offerings, that was part of the purpose for the bailout.  Companies should use that money in a way that they will become successful again and repay the bailout money to taxpayers.