Annuity FYI Blog

According to Investment News’ Darla Mercado, financial advisors are more loyal to Jackson National Life Insurance Co.’s variable annuity products than to any other company.  In the article, “Advisers most loyal to this VA provider,” we learn that Jackson National had the best variable annuity reviews followed by Prudential Financial Inc.  Jackson moved up from second place last year to throw Prudential out of the top spot this year.

Cogent Research performed the study of over 1,500 financial advisors.  They were asked what percentage of their business was dedicated to variable annuities and they rated their happiness with certain variable annuity factors.

Jackson’s internal wholesaler support had such a high ranking that it helped them grab the top spot.  Prudential had the highest variable annuity reviews for different product features, even though they didn’t get the top spot overall.  Advisors liked their guarantees, especially the Highest Daily feature.  Jackson does have nearly 100 subaccount choices as well, which still helped them reach number one.

The ChoicePlus variable annuity from Lincoln National kept them in third place this year.  Ameriprise Financial maintained their fourth place spot year to year.  Nationwide took the fifth spot from Ohio National, who came in seventh.  MetLife was in sixth place this year as well as last.  Sun Life, Allianz Life, and Transamerica finish the top ten for variable annuities.

Written by Rachel Summit

While they are looking for a huge increase in fixed annuity sales as well, MetLife already holds the top spot in variable annuity sales.  According to Annuity News Journal’s Steve Thompson, “MetLife Leads the Way in Variable Annuity Sales.”  They have made the customers better deals and while that coupled with a volatile market may hurt their short term earnings, they are not concerned about that for the long term.  The economic crisis of the past two years actually caused a decline in variable annuity sales because investors were seeking the comfort of a fixed annuity more often.  Now that investors are looking more towards their possible gains with variable annuities, fast growth could be a concern.  But MetLife is not worried about this growth because of their long history and sound business.

There have always been naysayers, saying that variable annuity products are too expensive and that they aren’t worth their guarantees against a stock market decline.  They have to change their tune after the ridiculous stock market losses that investors have incurred over the past couple of years.  Even if your variable annuity declined in value, your guarantees saved you from losing any of your principal investment.  That guarantee surely doesn’t seem so expensive anymore now that your retirement income is safe.  When you compare annuities, some even give you annual increases when the stock market is declining and most offer guaranteed lifetime income.  Variable annuities really do make sense for investors, even with any fees associated with the products.  MetLife’s booming variable annuity sales are proof positive.

Written by Rachel Summit

Despite the work of the government and many insurers, the use of annuity products in retirement plans is not as common as it should be.  Daisy Maxey’s Market Watch article, “Annuities in retirement plans remain rare,” lists some of the options available to investors.  Many retirement plan administrators don’t think that the appetite is big for annuities, but BlackRock Inc. says that their research has shown increased interest from plan participants.

Prudential Financial offers IncomeFlex for defined contribution retirement plans.  The variable annuity was revamped in 2009 to meet changing demands from plan participants.  Investors receive a guaranteed lifetime payout of at least 5% starting at age 65, for a 1% yearly fee.  There are 7,000 different retirement plans offering Prudential’s product and over $500 million invested, an increase from last year of $200 million.  Fidelity has a program to help retirement plan investors create portfolios by analyzing their individual situation.  Some investors worry that 5 year fixed annuity and other annuity rates are fairly low now, but Fidelity can help investors understand the value these annuity products will bring them in retirement.

The U.S. Department of Labor has been looking into multiple regulations regarding annuity products and their use in 401k annuity plans.  Some retirement plan sponsors seek more regulation before introducing or expanding their 401k annuity offerings.  BlackRock Inc. and MetLife Inc. are working together on the LifePath Retirement Income Fund annuity, but would like more clarification from the government on their fiduciary responsibility offering 401k annuity products.  While annuity products are available for purchase by retirement plan participants, the industry is still working on making them more readily available to ensure guaranteed retirement income for investors.

Variable annuity demand has been increasing for over a year now, according to Bloomberg’s “U.S. Variable Annuity Sales Rise 24% Led By Prudential, MetLife.”  Noah Buhayar’s article says that variable annuity sales have increased for five straight quarters as the stock market has risen.  Prudential Financial and MetLife have led the way in variable annuity sales and their increases have helped the industry thrive.  Sales were up 24% from the first quarter of last year to the first quarter of this year.  Prudential sold $6.81 billion of the total $38.9 billion.  They were the top variable annuity seller and saw an increase of 40% from last year.  MetLife’s $5.68 billion in variable annuities was the second most sold and a 41% increase from last year.

Many changes are expected in the variable annuity industry, which could be one reason for the increase in sales.  Investors are trying to lock in guaranteed benefits like death benefits and guaranteed annuity rates for payouts before any changes occur.  Equity linked variable annuity products saw large sales as the stock market increased from its lows in March of 2009.  Last year the S & P 500 increased 13%, followed by a 5.4% increase in the first quarter of this year.  The stock market increase and a possible worry about increasing fees or changes in benefits are a good part of the reason for the variable annuity sales increase.

MetLife is one of the top life insurance companies, and their annuity products are a big reason why.  According to “MetLife Annuities See Positive Outlook” by Errol Baddoo of the Annuity News Journal, the company’s annuity sales are soaring.  While they didn’t take first place in annuity sales in 2010, MetLife’s annuity sales of almost $21 billion made the top 5.  Their variable annuities sold $18 billion in 2010, a 19% increase from 2009.  While fixed annuity sales declined by 65%, they still accounted for around $2 billion in sales for MetLife.  Fixed annuities skyrocketed in popularity during the recent economic crisis because of their stability in a volatile marketplace.  As the economy has improved and variable annuities have increased in popularity, it only makes sense to see somewhat of a decline in fixed annuity sales.

MetLife’s newest variable annuity, a joint force with Fidelity Investments, is called the MetLife Growth and Guaranteed Income variable annuity.  In its first 12 months in the marketplace, this new variable annuity accounted for $1 billion in sales.  Some of MetLife’s other products include multiple annuity offerings like the 401k annuity, life insurance, other insurance plans, and a plethora of other retirement plan options.  Their biggest competitors are AIG, Hartford Financial, and Prudential Financial, the last of which took the top spot in annuity sales in 2010 with $23 billion.  MetLife’s stock value of $48.83 is 10% higher than the current market price, according to the Trefis stock price estimate.  Annuity products make up around 17% of the stock value for MetLife.  The company expects their newest variable annuity and other annuity products to add even more sales in 2011.