Annuity FYI Blog

With the hiring of Steve Kluever from Jackson National Life Insurance Co., The Hartford Financial Services Group Inc. hopes to increase sales of their variable annuities.  Investment News’ Darla Mercado writes about the surprise transition in “The Hartford nabs VA exec from Jackson.”  Since Hartford and Jackson have taken very different approaches to business following the financial meltdown of the past few years, many industry insiders were surprised by this transfer.  Kluever will head a new position at Hartford as the vice president of annuity product and marketing.  In 2006 Hartford was the fourth largest seller of variable annuities, but fell drastically after the economy went sour.  They hope to come back from their significant variable annuity hedging losses with this new hire and position within the company.

Hartford was in 20th place last year in their sales of variable annuities, quite a jump from their fourth place status four years prior.  Jackson, on the other hand, was the third largest variable annuity seller, likely due to their approach to product development in the past few years.  Jackson’s financial advisors and clients have around 100 variable annuity subaccounts from which to choose, while Hartford chose to lessen the risk in their product line.  While Hartford has to be careful about the changes they are making to increase their variable annuity presence, they are starting slowly by adding annuity wholesalers and enhancing their Personal Retirement Manager variable annuity soon.  Working 401k annuities into their plan might also be an effective way to increase sales since even the federal government is suggesting these retirement products to help Americans combat longevity risk.

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.

According to “Taking off the glitz,” Darla Mercado of Investment News says that variable annuities are losing some of the benefits that made them so popular in the first place.  Many living benefit features were added and made more attractive last year in order to draw investors into variable annuities.  But since low interest rates make it more expensive for insurance companies to offer benefits like lifetime withdrawal benefit guarantees, some of the top sellers of variable annuities are offering less to investors.

Prudential and MetLife are two of the largest variable annuity providers and two companies that are pulling back on their benefits.  While Prudential used to base lifetime income on 6% compounded growth, they have lowered that to 5%.  They have also increased the amount of time investors must defer their annuity from 10 years to 12 years in order to receive their promised protected value.  MetLife has decreased the income annuity associated with the guaranteed minimum income benefit because of low annuity rates.

Advisors are not happy that the benefits they have been pleased to offer investors are being reduced and are looking to new companies for different variable annuities.  Ohio National Financial Services Inc. introduced a new 8% simple interest growth lifetime withdrawal benefit, available on your entire original payment.  Thomas B. Hamlin of Somerset Wealth Strategies is pleased with the annual reset and 8% growth offered by Ohio National.  Transamerica Corp.’s Retirement Income Choice 1.2 rider and their withdrawal benefit are other good annuity choices right now.

The article lists other good benefit options from Protective Life Insurance Co. and Jackson National Life Insurance Co.  It is suggested that Jackson may move up to be the top seller of variable annuities now.  MetLife and Prudential still have a lot to offer in the variable annuity market as well, even with trimmed down benefits.  The moral is that variable annuities are not “one size fits all” and really must be customized to the individual investor and their needs.

Jackson National Life Insurance Company saw a 37% increase in sales during the first three quarters of this year, due mostly to a great increase in sales of variable annuities.  In the Annuity News Journal article “Jackson National Sales Rise To $14 Billion,” Christi Roberts says that the company’s sales of $14.3 billion jumped 37% from the same time frame last year.  Sales of Jackson’s variable annuities increased 57% to nearly $10.5 billion.

President Mike Wells stresses that Jackson has seen this increased growth because they are offering products with a higher value rather than lowering quality to obtain a bigger share of the market like some of their competitors.  10.5% of their increase came in the first half of the year capping off three quarters with the highest retail sales of variable annuities.  Jackson sold $1.88 billion during the second quarter of 2010, which was the most they have ever sold in one quarter.  They also saw the largest growth of any company in their industry between June 2009 and June 2010 as the company assets increased by over 45%.

They began offering two new lifetime guaranteed minimum withdrawal benefits this year.  One combats taxes by allowing investors to increase the amounts they withdraw.  They also introduced the first customizable GMWB.  Whether an investor is looking for a death benefit annuity or other guaranteed benefits, between this new GMWB and the 8 new portfolios being offered by Jackson, they will find what they need.  Jackson maintains an ‘excellent’ rating from all four of the financial ratings firms, and has over the past seven years.

Allianz Life Insurance Company has a new senior vice president and national sales manager, according to press release “Allianz Life Promotes Bob Densmore to SVP – National Sales Manager.”  Bob Densmore will be in charge of their annuity sales strategy in the bank, regional, independent, and wire broker/dealer distribution channels.  Allianz has been happy with his leadership skills as well as his revenue generating abilities.  They promoted him to capitalize on the popularity of annuity products, focusing on the channels consumers want to buy them through and the specific guarantees for which they are looking.

His nearly twenty years of experience in the financial industry began with Thrivent Financial.  Densmore started working for Jackson National in 1996 and was in charge of the wholesaling for fixed and fixed indexed annuities.  He was a regional vice president for Jackson, where he raised their variable annuity premiums to two billion dollars.  As one of the top producers at Jackson, he worked to develop new variable annuities, living benefits, and other marketing campaigns.  He started working for Allianz Life in 2008 and hopes to increase the success of their annuity business.