Annuity FYI Visitor Blog

Variable annuity sales increased from the 1st quarter of 2009 to the first quarter of 2010, according to Insurance News Net’s “US Sales of Variable Annuities See First Year-Over-Year Gain in Two Years.”  With $31.4 billion in total sales, variable annuities increased 3% from the same time last year.  The first quarter of 2008 was the last time that there was such an increase in variable annuity sales.  A spokeswoman for the Insured Retirement Institute says that this marks a slow and cautious return to the stock market for investors.  The sales are from both individual and group annuities.

Eighty-percent of investors who purchased a variable annuity also included some type of living benefit guarantee.  The most popular was the guaranteed lifetime withdrawal benefit.  Purchasing a death benefit annuity was also widely popular to protect investors’ heirs.  Prudential Financial, Inc. remained the top variable annuity seller in the first quarter of 2010, after capturing the top spot for all of 2009.  The rest of the top five companies were MetLife, TIAA-CREF, Jackson National Life and Lincoln National Corp.  The consensus with variable annuities is that they are getting simpler for consumers and less risky for insurers.

Fixed annuity sales in the United States were $27.8 billion in the second quarter of 2009, according to a press release from Beacon Research.  While the sales were a 20% decrease from the first quarter, they were 10% higher than the second quarter in 2008.  From the highest sales to the lowest, the annuity products sold were book value, indexed, market value adjusted, and fixed income.  All but one type were an increase from the second quarter in 2008.  Indexed and income annuities were up from the previous quarter, while the other two types fell.  Fixed annuities can be purchased with a 401k annuity transfer or an upfront one time purchase.

New York Life took over the top sales spot last quarter from MetLife.  The rest of the top ten was as follows: Aviva USA, Allianz Life, AEGON/Transamerica, American Equity Investment, RiverSource Life, MetLife, Lincoln Financial Group, Jackson National Life, and Western National Life.  New York Life maintained the top sales in both the book value and fixed income annuity products.  The leading indexed annuity seller remained Aviva.  The only change in leaders of the individual products was American National taking over the top sales spot of market value adjusted annuities.  Beacon uses the sales results of 53 insurance companies which represent 86% of annuity sales to determine their findings.

After severe fourth-quarter losses, annuity provider Lincoln National has decided to enter a reinsurance agreement with Commonwealth Annuity and Life Insurance Co. The Wall Street Journal’s Kerry E. Grace writes that the plan will result in capital relief of around $240 million.

Details of the agreement between Lincoln and Goldman Sachs subsidiary Commonwealth are as follows:

• Lincoln will re-insure $1.5 billion of its reserves (solely a closed block of life insurance policies) to Commonwealth
• Commonwealth provides quota-share coinsurance of 55%

Last week, Lincoln (also known as Lincoln Financial) withdrew its application to issue debt under the FDIC Temporary Liquidity Guarantee Program. However, they may still receive some government assistance: Lincoln is now eligible for U.S. Treasury funds, since its’ application for a savings-and-loan charter has been approved.

The Retirement Income Reporter recently reported on annuity provider Lincoln National receiving $300 million in regulatory tax relief from the state of Indiana. The Indiana Department of Insurance is allowing the life insurance company to use a certain accounting practice with deferred tax assets that will free up capital. The division that sells fixed annuities and variable annuities, Lincoln Financial Distributors, has had to lay off over 10% of its workforce over the past few months.

Lincoln’s Chief Financial Officer stresses that no material money was injected into the annuity or life insurance reserves. Their risk-based-capital is over the 250% needed for life insurers to avoid regulatory attention.

Hartford Business Journal’s Greg Bordonaro has mentioned the recent trend in major life insurance companies acquiring small savings and loan institutions.

Lincoln National, Hartford Financial, and Genworth Financial are among those that have recently bought up S&Ls.

The acquisitions make life insurers eligible for funding from the Capital Purchase Program provided by the federal government. That program’s money is reserved for depository institutions.