Annuity FYI Visitor Blog

In the Chicago Sun-TImes, David Roeder describes why there is “Little payoff seeking the next Google.”  He summarizes some of the latest financial news and goings-on.  Financial guys on TV always seem to be looking for the next company that will start from nothing and skyrocket to success, like Google or Apple.  But looking into the past 10 or so years, the companies with the highest expected growth potential actually had the worst annualized returns.  It seems that the lowest expectations in the stock market actually provide for the best investments.  There are some large companies whose stocks are being recommended by Chicago Investment banks like William Blair & Co.  Others are looking to invest in products that teenagers love: food & entertainment included.

Companies like MetLife, Hartford Financial, and AIG look to benefit from the Obama administration’s new recommendations.  They are looking to introduce rules that will push retirees to 401k annuities rollovers.  Currently only 2% of people with 401k’s convert them to an annuity in retirement.  Since annuities help to counteract the risk of outliving one’s savings, the government believes that this guaranteed income will help Americans through retirement.  Finance information is all over the news and has even seeped into the entertainment world.  A new documentary entitled “Floored” about the Chicago trading floors is playing in Chicago.  With the renewed public interest in financial freedom, information about stocks, annuities, and retirement is at the forefront of America’s publications.

In “Save Yes. Spend No. Lessons we’ve learned from the recession” by Geoff Williams of Wallet Pop, he summarizes the new habits that may help the next generation avoid financial struggles.  MetLife surveyed 2,200 adults and found that they have made important changes in their spending habits.  They are not spending as much money on non-essential items, are building up cash savings, and are saving more by using guaranteed income or low-risk products such as an annuity.

While 15% of those surveyed said they have spoken to a financial adviser and/or updated their portfolio to reflect economic changes, 15% is a relatively low number.  Many people either don’t have the money to save right now or think that they don’t have the money to save.  Those are precisely the consumers that should seek advice from a professional because they can help you “find” the money to protect your future.  Williams stresses the benefits of purchasing an annuity or other low-risk investment: a guaranteed stream of income that will continue over your lifetime.  A financial adviser can search for the best annuity rates and match consumers with a product that is right for them.  It is wonderful that people are more concerned with their financial future now; speaking with a financial professional is just another aspect of that.

In “Insurers Retool Annuity Offerings” by Leslie Scism of the Wall Street Journal, Scism describes how insurance companies are making changes to the variable annuities they offer to lower their risk while maintaining the products’ appeal to consumers.  The guarantees previously offered are the issue worrying many insurance companies.  While sales of variable annuities helped dozens of insurers grow exponentially over the past decade, the drop in the stock market brought the risk of these guarantees to the forefront.  Insurance companies have prepared their balance sheets for the impending lifetime income guarantees that will become payable based on the stock market’s high in 2007.  Two companies had to do this by taking federal bailout money.

But variable annuities are becoming popular again as their sales increased last quarter for the first time in over a year.  The new products are simpler but still offer most of the great benefits variable annuities are known to have.  Hartford has what they call a “derisked” VA offering and MetLife is coming out with their “Simple Solutions” product.  Although the products may have a higher cost to benefit ratio than variable annuities of the past, consumers are still receiving great annuity rates and benefits.  Consumers want to buy their annuities from companies that will stand the test of time and these changes are what will keep the insurance companies around.  Manulife’s John Hancock unit offers “AnnuityNote”, which has been on sale for a few months and is doing well while offering relatively low costs compared to their 5% and above lifetime annual payouts.  As advisers and consumers realize that these changes will benefit them with lifetime guaranteed income from an insurance company that will be around for their lifetime, variable annuities are sure to be purchased even more.

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.