Annuity FYI Visitor Blog

One of Canada’s largest insurance companies, Sun Life Financial Co., is working to expand their U.S. business.  According to The Boston Globe article “Sun Life broadens its horizons in US,” Todd Wallack says that Sun Life is in the midst of a huge nationwide advertising campaign.  Wallack interviewed the head of Sun Life in the U.S., Wes Thompson.  Their U.S. unit is based in Wellesley, MA, employs more than 1,800 people, and serves millions of customers in the U.S.  Sun Life’s biggest products are group life insurance and annuity products.  They hope to grow their U.S. business by double digit gains.

Now is a good time for Sun Life to advertise because costs are low and there are many fewer financial companies on the airwaves than there were two or three years ago.  They have already increased the number of people who know of their company from 4% to 16% of those surveyed.  While group life insurance is their largest segment of business, Sun Life sells many annuity products as well.  President Wes Thompson defended the typical higher costs of variable annuities due to their array of guaranteed riders like death benefits.  He said that they all comparable to the costs and benefits of other industry products.  And while Sun Life moved away from selling fixed indexed annuities because of the general impressions of that business, he does believe that there are good products out there.  Unfortunately, some bad companies had products charging too much in commissions with too high of surrender periods.  Sun Life believes in the life insurance and annuity products they sell and are happy to introduce their company to Americans.

According to a company press release, First Investors Life has a new deferred option to add to the variable annuities marketplace.  Their ‘First Choice’ product is flexible, with the ability to choose from many different options.  There are 11 subaccounts, all professionally managed with different goals and levels of risk.  If you purchase a First Choice variable annuity, you can put money into all of the subaccounts if you desire, as long as each has a minimum of 1%.

Investors won’t pay any income tax on their earnings while the money grows.  Taxes are not due until you start withdrawing the money.  You also are not required to take the money out starting at age 70.5 like you have to with 401k’s and IRAs.  Your money can build up until age 90 if you wish and you can continue to add money at any time because of First Choice’s flexible premium.  Investors can choose guaranteed income for life through annuitization, take systematic withdrawals that can start or stop at any time, or withdraw the full the surrender value of the annuity.

The First Choice product is a great addition to First Investors Life’s current products.  They already offer permanent and term life insurance policies and two different fixed annuity products.  Those are ‘First Advantage’ and ‘First Advantage for Income’.  First Investors Life Insurance Company distributes annuities through First Investors Corporation out of New York City.

The Insured Retirement Institute (IRI), the non-profit organization promoting insured products like annuities, has introduced a retirement pyramid.  The pyramid aims to provide a secure retirement for its users by putting the largest amount of money into the largest or bottom tier and gradually decreasing the amounts as you climb the pyramid.  National Underwriter’s article “IRI Promotes Retirement Planning Pyramid” explains the strategy.  This week is the IRI’s National Retirement Planning Week of 2010, so they chose this time to promote the retirement pyramid.

This pyramid concept is meant for both consumers and professionals in the financial industry to use.  The three items making up the base of the pyramid are annuities, social security, and defined benefit pension income.  The second tier, called “long-term assets”, includes fixed annuity and other annuity income, 401k plans, real estate, and individual retirement accounts.  “Insurance” is the third tier encompassing Medicare, health insurance, life insurance, and long term care insurance.  The IRI’s top tier, “Investments”, is where they put stocks, bonds, mutual funds and certificates of deposit.

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.