Annuity FYI Blog

The list of the top variable annuities sold in bank channels this year was just compiled.  The Bank Investment Consultant article “The Most Wanted List (of Variable Annuities,” by Kerry Pechter, talks about the most popular variable annuities of the year thus far.  It’s well known among financial consultants and advisors that variable annuities do not sell themselves; the benefits need to be sold to investors.  The benefits of protection from a down market and potential for upside market gains are what many investors are looking for today.  Variable annuity sales in the bank channel increased in the first quarter of this year, while sales in many other channels actually declined.

Jackson’s National Perspective II was the top seller.  Jackson appeals to investors and advisors looking for more flexibility and a lot of options as opposed to a low cost.  Their GLWB option, called the Joint Lifetime Freedom 6, offers increases in the guaranteed benefit base.  Prudential’s Advisor Plan III and APEX II have been replaced by a new, similar product but still account for the second highest bank annuity sales.  Their aggressive marketing and their “Highest Daily 6 Plus” living benefit, along with fees in line with other annuity products on the market have helped maintain Prudential’s variable annuity success.

The third best selling of the bank channel variable annuities is Nationwide Bank of America’s Future Venue.  The product offers L.inc, a popular and affordable lifetime income rider.  Pacific Life’s Voyages is the least expensive and most conservative on this list.  When you compare annuities with these options, conservative investors tend to be satisfied with Pacific Life’s CoreProtect Advantage lifetime income option and their other riders without rollups.  Variable annuities with GLWBs and rollups are great investments in today’s economic climate.  It’s important for advisors to speak with their clients about the products since clients rarely research variable annuities on their own.

In a press release from A.M. Best Company, they affirmed Nationwide’s financial strength ratings of A+ and aa-.  In “A.M. Best Affirms Ratings of Nationwide Financial Services, Inc. and Its subsidiaries; Outlook Negative,” the ratings are summarized.  Nationwide Financial Services, Inc., owned by Nationwide Mutual Insurance Company and Nationwide Mutual Fire Insurance Company, and its subsidiaries operate out of Columbus, Ohio.  Subsidiaries Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance Company had affirmed financial strength ratings of A+ (Superior) and issuer credit ratings of aa-, partially due to sales of their best annuities.  The parent company’s issuer credit rating of “a-” and all of its debt ratings were also affirmed.  According to A.M. Best, the outlook is negative for all of Nationwide’s ratings.

Nationwide’s business profile is diverse with many product lines, has wide-ranging brand recognition and a leading position in the market of public retirement plans.  Their net flows in retirement and individual annuities are stable and improving.  Their financial leverage is within the guidelines judged by A.M. Best.  Some factors offsetting the ratings include a large exposure to mortgages, mortgage-backed securities and bonds that are below investment grade.  While there are still moderate levels of impairments going forward due to these factors and an industry hit hard with the economy, they have been able to combat the impairments with a decline in individual annuity outflows, mainly due to variable annuities, and good net flows in the public 457 retirement market.

Amid market turmoil, several insurers that sell annuities and life insurance are making changes to their executive boards:

• The Associated Press recently reported that New York Life Insurance has named Ted Mathas as its new chairman, effective June 1. He is currently the insurer’s Chief Executive Officer and President. Mathas is replacing the retiring Sy Sternberg.
• As reported yesterday by Rachelle Younglai from Reuters, Nationwide Mutual named Steve Rasmussen as CEO after suddenly deciding to fire Jerry Jurgensen from the position. Rasmussen is also Nationwide’s President and Chief Operating Officer.

A recent press release by A.M. Best announces that they have revised their rating of Nationwide Financial Services to negative. Nationwide’s rating had been stable.

A.M. Best says that the downgrade are is largely due to the fact that the firm’s financial performance is heavily based on the equity markets. Its products include variable annuities and variable life insurance, the former of which has been hit severely by the stock market’s fall. Nationwide’s line of variable annuities is currently garnering negative net flows.

However, there is a silver lining: the company has positive total annuity flows, presumably due to successful fixed annuity sales.

Nationwide has had several of its companies’ annuity safety ratings downgraded by Fitch Ratings. Fitch puts the blame largely on the privatization of Nationwide Mutual Insurance Company’s (NMIC) life insurance operations, which resulted in decreased capital availability and flexibility. Investment losses in 2008 and predicted for this year also contributed to Fitch downgrading Nationwide. 

Important rankings from the Fitch press release:

• The Insurer Financial Strength (IFS) ratings for NMIC, Nationwide Life Insurance Company of America (NWLA), and Nationwide Life Insurance Company (NWL) have slipped from AA- to A+.
• Fitch’s Rating Outlook for Nationwide is now Negative.
• Nationwide Financial Services’ (NFS) senior unsecured debt has had its rating downgraded to BBB+ from A-.