Annuity FYI Visitor Blog

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.

Massachusetts Mutual Life Insurance Company has a new President and CEO, according to Insurance News Net’s article “Mass Mutual’s Incoming CEO Will Draw on Experience to Lead Through Crisis.”  Roger W. Crandall has been with the company in many different capacities since 1988, so he has seen his fair share of economic and financial turmoil.  Mass Mutual, founded in 1851, was the 13th largest U.S. life insurer in 2008 according to A.M. Best Company.  Unfortunately they had a net loss of $1 billion last year after experiencing what Crandall calls “the worst financial market crisis since the Great Depression.”  The fee income that Mass Mutual generates from managing assets fell dramatically with the equity markets.  After changing its portfolio around in the last year by adding investment-grade corporate bonds and reducing some of their other holdings, the company is happy with their turnaround.

Overall the financial markets affecting Mass Mutual are doing well this year so there is no plan to change the strategy of the company.  They are a mutual life insurance company that is run for their participating policyholders benefit and they will stay that way.  Crandall begins as CEO January 1 of next year.  His experience in life insurance and annuities will help him lead the company in a positive direction.  Like some other writers of variable annuities, Mass Mutual stopped selling many of the “living benefit” riders in 2008 because the risks and costs were not aligned in a difficult capital market.  Hopefully, as the markets continue to improve, consumers making a 401k annuity transfer and purchasing variable annuities will be able to find exactly what they are looking for with Mass Mutual.

The Allianz Life Insurance Company of North America has been selling annuities, life and long-term care insurance since its inception in 1896, according to company press release “Allianz Life Ratings Reaffirmed and Record Earnings Reported.”  Allianz Life is based in Minneapolis; their parent company is Allianz SE, a global financial services group.  Both their Moody’s and Standard & Poor’s ratings were reaffirmed this year.  Moody’s rates Allianz Life A2 (Good) and their S & P rating is AA (Very Strong).

The second quarter of 2009 was record setting for the company’s profits, which were up 77% from last year.  Their capital position also improved significantly with help from their parent company.  Allianz Life’s President and CEO is grateful to have such a strong parent company during difficult economic times.  They also believe that they have benefited from their conservative investment portfolio.  Using a 401k annuity to ensure guaranteed income for life is becoming more popular as people live longer.  Allianz Life has new variable annuity rider options that it will introduce next week to keep up with consumer demand for annuities.

On January 1, 2010, a new law will make annuity and life insurance distributions tax-free if they are used for the cost of a nursing home.  Robert Powell of Fox Business online wrote about this in “New Products May Ease Bite of Long-term-care Costs.”  In anticipation of this law, insurance companies have created hybrid products that mesh annuity and life insurance products and long-term-care insurance.  United of Omaha, Genworth Life, Bankers Life, and OneAmerica are leading the charge with many other products expected to emerge later this year.

Although all of the products are different, they share the following main points.  A fixed deferred annuity is purchased with non-qualified money.  There is a long-term-care rider attached to the annuity which releases funds two or three times the beginning investment, for a certain number of years, or for the recipient’s lifetime.  These hybrids can possibly lower the burden of long-term-care costs significantly, but they have their own fees associated with them.  You should thoroughly consider an expert’s advice and weigh the pros and cons of any annuity before making a purchase, especially a new hybrid product.