Annuity FYI Blog

More and more insurance companies are offering indexed annuities now, especially those who were traditionally only big sellers of variable annuities.  Sheryl Moore’s Insurance News Net article, “Interest in Indexed Annuities on the Rise,” says that you have to look at the market to understand why many companies have decided to sell fixed equity indexed annuity products in addition to their other annuities.

During market increases, many people transfer their money from fixed products to securities so that they can take advantage of the increasing market.  Variable annuities sell very well after the markets hit rock bottom because they can only go up from there.  Market increases provide investors with great gains in their investments.  In a declining market however, investors tend to leave stocks, bonds, and variable annuities for fixed products.  They are fearful of losing money, including both principal and potential gains, so they turn to fixed annuities and indexed annuities.

When fixed interest rates are increasing, there is usually a corresponding increase in sales of fixed annuities and CDs.  When fixed annuity rates were in the double digits, there was an influx of fixed annuity 1035 exchanges and CD rollovers.  During a declining period for fixed interest rates, some investors hold on to their fixed products while others switch to securities like a fixed equity indexed annuity for some potential of a gain.

Taking a combination of these market conditions into effect, indexed annuities stand to gain in a low market with low interest rates.  That is why they have become increasingly popular in the last few years.  Insurance companies who previously disliked the products have realized that they stand to benefit from introducing their own version to consumers.  The principal protection with possible market gains is looking very good to investors right now.

Written by Rachel Summit

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According to “Retiring in a positive tax climate is only half the battle,” written by Christopher Scalese for The Times-Tribune, fixed and fixed indexed annuities could be great retirement vehicles for Pennsylvania residents.  They are lucky to live in a state with favorable tax codes for retirees, but Pennsylvania residents still have to find a way to maximize their retirement income.  In Pennsylvania, they have a low sales tax, Social Security benefits are not taxed on the state level, and pensions are only partially taxed.

These tax benefits are a great start, but residents still need to make the most of their retirement savings and annuity products are a good way for many people to do that.  Interest rates are very low on bank CD’s right now and although annuity rates are lower than they have been in the past, fixed annuity rates are higher than those of CD’s because they are offered by insurance companies rather than banks.  Fixed annuities are a good way to earn interest tax-deferred and keep your money safe from volatile markets.

If you are looking for some market exposure, fixed indexed annuities give you that, but they still protect your principal from any losses.  People who choose annuities are typically looking for a safe way to grow their money and ensure that it lasts through retirement.  Annuities also offer tax savings that can add to the benefits already established for Pennsylvania residents.  Every safe investment has terms that you should look into and annuities are no different.  It’s best to speak with an expert and make sure the product is right for you.

Written by Rachel Summit

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The Sacramento Bee published a press release from John Hancock Financial Services introducing their new President of Annuities, John G. Vrysen.  He starts his position immediately and will be in charge of all aspects of John Hancock’s annuity business.  This includes variable annuities, fixed annuities, structured settlements, immediate annuity products, and other fixed products.  His boss is the President of U.S. Wealth Management, Hugh McHaffie.  Mr. Vrysen recently merged many of the company’s life insurance subsidiaries to increase company efficiency.

John Hancock’s President of Financial Services says that Mr. Vrysen has a plethora of both leadership experience and experience in their Variable and Fixed Annuities business.  Since 2008, he was the head of Strategic Initiatives, a position that will now be held by the previous President of Annuities, Marc Costantini.  Mr. Vrysen has worked for Manulife and John Hancock for more than three decades as the variable annuities’ chief actuary, the CFO of US Operations, the fixed annuities general manager, the COO of Wood Logan, and the COO for John Hancock Funds.

Written by Rachel Summit

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While demand for variable annuities is still very high, many insurers are stepping back from them quite a bit.  According to Investment News’s Darla Mercado in the article “VA carriers hunkering down,” life insurers have had a hard time hedging their variable annuities with living benefits.  Stock market volatility and low interest rates are making it expensive for insurers to offer variable annuities.  Genworth Financial stopped selling annuities at the beginning of 2011 and Sun Life Financial stopped their sales earlier this month.  Some of the biggest companies; like Jackson National, MetLife, and Prudential Financial; have stopped offering some of their living benefits and started using less risky investment options.

John Hancock Life plans to stop selling a lot of their annuity products as well as limiting their distribution channels.  As more companies do the same, there will be less competition in the industry and prices could rise.  Most advisors still send their clients to the top three sellers, MetLife, Jackson and Prudential.  There may be more room for the smaller companies in the future.  If living benefits drop below 5%, many advisors will be playing up the tax deferred growth benefit of variable annuities.  With fewer living benefits offered, advisors will go back to the root benefits of variable annuities, death benefits and tax deferred growth.  One advisor believes that 2013 will see a big focus on those benefits over the living benefits of variable annuities.

Written by Rachel Summit

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There have been some new annuity products introduced this year, but they have not been in abundance and agents are looking for more to offer their clients.  Insurance News Net’s Linda Koco estimates that we may have to wait a bit longer in the article “2012 Could Be Rebuilding Year for Annuities.”  The article summarizes what happened this past year in the new annuity market and what is expected to happen in 2012.

The traditional deferred fixed annuity didn’t get much love this year, partly due to low interest rates and partly due to insurers worrying about guaranteeing any fixed rate at all.  Many annuity carriers brought new tools for their sellers and annuity clients to use, including online reporting and comparison tools.  While there were some new variable annuities introduced this year, they weren’t as exciting as in years past.  What is important in regards to the variable annuities is the focus on new GLB riders.  Some advisors say that clients will only purchase annuities with these guarantees in place.

Indexed annuity products are hotter than ever, boosted by large product development releases this year.  Even this month saw two new indexed annuity products, one from Hartford and one from Genworth.  Income products, including annuities, riders, and options are hot on the development list.  There were also some new immediate annuities this year as companies look to offer  more options to retirees.  So while this year wasn’t particularly exciting when it came to new product development, there are some new things out there and 2012 may be a more exciting year for annuity product development.

Written by Rachel Summit

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