Date posted: March 14, 2013
The annuity market is in a tough spot with variable annuities right now. They are still good products and offer many investors benefits they can’t get anywhere else, but low interest rates have made it hard for insurance companies to keep up the guarantees. The living benefits have put a strain on insurance companies, so we should all be prepared for upcoming changes. While they will make an already complex product even more complex in some cases, changes will help the variable annuity industry survive and even thrive. Darla Mercado of Investment News offers up “8 notable trends in the VA business” to look for this year.
You will see more advisory share classes than ever before. These products will be low cost so that advisors can add on their fee. Nationwide is one of the latest to introduce an advisory share product with their Destination Income variable annuity. We’ve already seen an increase from 34 product offerings to 63 since just last year. Another continuing trend in the variable annuity market will be cash offerings for selling old products. AXA, Transamerica, and The Hartford are just three of the insurance companies offering clients an increased account value if they sell their variable annuity with living benefits back to the insurer.
To help manage living benefit riders, more insurance companies are adding volatility management funds to their variable annuities. Ohio National Life and Nationwide are two of the most recent companies to offer these funds for their variable annuities. We’ve written many posts about Sun Life selling its variable annuity business to private equity firm Delaware Life, a subsidiary of Guggenheim Partners. This selling off of older variable annuity business to private equity firms is very likely to continue. It shows a bright future for the industry that there are firms willing to buy the variable annuity business, most recently Berkshire Hathaway Life purchasing Cigna’s business.
Jackson National is now offering variable annuities that are more investment focused and do not offer lifetime income benefits. There will probably be a lot more of these products introduced in the VA market that eliminate these living benefits to help insurers avoid large increases in their long-term liabilities. I’m certain that investors won’t like this next trend, but you probably aren’t surprised that fees are likely to increase on variable annuities. Although AIG’s VALIC did drop some fees on their products, most insurers will probably be increasing variable annuity fees this year.
There is a good chance that some other companies will follow MetLife’s decrease to a 4% guaranteed minimum income benefit. A yearly 4% increase in the benefit base and 4% withdrawals are not really a bad deal in today’s economic environment, despite the fact that they are less than previous offerings. Finally, there is quite an increase in the number of hybrid investments in the market. By combining structured products and variable annuities, clients’ money is protected if markets take a dive while they still have access to increases in the market. AXA, MetLife, and Allianz Life are all offering these hybrid annuities already.
Although we are approaching the 2nd quarter of the year, we are still monitoring early trends and making educated guesses about what will happen the rest of this year. Stayed tuned to Annuity FYI to see where this all takes us in 2013.
Written by Rachel Summit
Follow Rachel, aka Finance Mama, on Twitter and Google+
Date posted: December 10, 2011
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
Follow Finance Mama on Twitter http://twitter.com/#!/financemama
Date posted: March 5, 2011
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.
Date posted: August 6, 2010
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.
Date posted: August 3, 2010
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.