Annuity FYI Blog

The retirement income business and the broker-dealer unit have been combined by New York Life Insurance Co.  They just reorganized their company into two separate businesses.  Their insurance group will remain a separate entity from the other business of retirement income.  New York Life Investments, the broker-dealer unit, will join with New York Life’s retirement income business and be headed by Executive VP John Y. Kim.  Currently, the retirement income business includes both immediate and deferred fixed annuities as well as variable annuities.

Kim has been in charge of New York Life Investments since 2008.  He will now be in charge of New York Life’s retail annuities and mutual funds, as well as their retirement plan services and institutional asset management.  Executive VP Chris Blunt will be running the separate insurance business; he previously was in charge of the retirement income business that has been combined with New York Life Investments.  His job responsibilities in addition to running the insurance business will include the company’s long term care insurance and the business operations of marketing, finance, technology, and service.  The Mexico operations are also now part of this new group.

New York Life’s market share has increased to double digits since they started their reorganization in 2008.  They have also seen significant growth in their investment business and retirement products like annuities.  This realignment will help them keep their focus on agency led distribution.  Their 12,000 agents will still be overseen by Executive VP Mark Pfaff.  The company believes this realignment will help them keep their top spot in the life insurance industry and annuity industry, as well as increase their other retirement business.  A.M. Best rates New York Life Superior with an A++ score.

Written by Rachel Summit

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For more than twenty years, research and consulting firm Dalbar has come up with a list of the companies offering the best annuity service.  Their list for 2011 includes both big and small names, but all of the winners have the best customer service in the industry.  This year’s Annuity Service Awards go to AXA Equitable-Equivest, Prudential Financial, Pacific Life, New York Life, SunAmerica Annuity and Life Assurance Company.  Dalbar’s press release, “Dalbar Announces Its 2011 Annuity Service Award Winners in Financial Services,” lists the winners and the criteria for having the best annuity services.  Thousands of tests are done over the course of each year looking into the customer service at these annuity companies.

The industry only averages a 69% friendly engagement when customers initially call the company.  The service award winners are friendly and let their customers know they are appreciated 95% of the time, in comparison.  Annuities are complex products, and making sure that customers understand their product and are comfortable with all aspects is crucial.  Annuity award winners make sure their clients know all of the details from an expert and follow up with them 85% of the time, while the industry as a whole only does it about half of the time.  These companies are also all consistent with their superior treatment of customers and their company practices.  Since this award was introduced 15 years ago, New York Life has won it 12 times and the other winners have all won between 5 and 11 times.

Written by Rachel Summit

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Recently I read an authoritative research study in which psychologists asked half the people if they thought they would live to age 85 (a positive “framing” of the question) and asked the other half if they thought they would die by age 85 (a negative framing).

The first group said yes more often than the second group said no, so the researchers concluded that people are more optimistic about living longer than if they are quizzed about their life expectancy in a positive rather than negative way.

Since they expected to live longer, the first group was also, on average, relatively more willing to consider buying a single-premium, single-life-only immediate life annuity (an irrevocable contract that converts a lump sum into a guaranteed income stream for one person for life) than the second group.

That was no big surprise. Everyone (especially the actuaries who price annuities for insurance companies) knows that healthy people with parents or grandparents who lived to age 95 or 100 are much more likely to buy annuities than people who smoke or have short-lived ancestors. Indeed, this fact tends to make life-annuity prices about 10% higher than if a mix of healthy and sick people bought them.

But what irked me was that the researchers, like the researchers in most annuity studies, asked the participants if they would buy a single life-only annuity. That’s the kind of annuity where if you get “hit by a bus” only “a day after buying your annuity” the insurance company “gets all your money.”

Such annuities exist-but hardly anyone buys them. Many if not most life annuity buyers-and I hear this from the folks at New York Life, the biggest private seller of immediate annuities, and from TIAA-CREF, the biggest non-profit seller of annuities-hedge their bets by adding a “period certain” or a “cash refund” or “joint and survivor” option to their contract.

Under a “life with period certain” contract, you or your beneficiary get monthly payments for life or for either five, 10, 15 or 20 years-whichever is longer. If you do the math, you’ll discover that 15 years of guaranteed payments will ensure you (or your beneficiary) a return of principal. So will a “cash refund” contract. And a joint-and-survivor option ensures that
income will last as long as either of two people (usually husband and wife) is living.

Unfortunately, journalists as well as researchers have come to characterize all immediate income annuities as the “hit by a bus” type.  Year after year, their stories in popular newspapers and magazines perpetuate this misimpression. As a result, lots of people don’t learn how flexible income annuities can be, and never even consider a tool that could make their retirement years much more financially secure.

Written by Kerry Pechter

Financial advisors whose clients hold annuities haven’t had to worry about fielding concerned investors’ calls in this tumultuous market.  According to The Wall Street Journal article “Annuities Provide Safety, At a Price,” author Russell Pearlman says that annuity sales have been increasing due to the difficulty in the financial markets.  Annuity sales went down in 2008, 2009, and 2010; but are expected to increase in 2011.  With the increasing interest in the best annuities on the market, companies like Hartford and New York Life are introducing new and improved products to meet investor demands.  But they have often seen an increase in annuity sales before they can even get their new products on the market.  New York Life’s main fixed immediate annuity has seen a sales increase of 62% since last year at this time.

Both fixed annuities, which guarantee you a specific rate of return, and variable annuities, in which your rate of return varies while you receive tax benefits, have seen an increase in sales.  For an added fee, you can guarantee that you will receive payments over your lifetime even in a declining stock market.  You can also opt for a death benefit annuity where your payments will continue going to your heirs after your death.  Principal Financial Group says that now is a great time for an annuity if you want to maintain exposure in the markets while guaranteeing a specific income level.  The article points out the importance of speaking with an expert and knowing all the complexities involved before purchasing an annuity.  They take a lot of risk out of investing so many investors are sleeping soundly at night knowing that they have a guaranteed stream of income.

Written by Rachel Summit

According to Insurance Networking News’ Justin Stephani, “Annuity Writers Show Significant Growth.”  In a fixed annuity study performed by Beacon Research, they found that despite an annuity rates comparison showing declining interest rates, fixed annuity sales increased 8% quarter to quarter and 3% year to year.  These results from the first half of this year coincide with similar reports from LIMRA and the Insured Retirement Institute.  LIMRA found a 19% year over year increase for total annuity sales, in the period ending June 30.  The IRI reported a 10% increase for the second quarter’s year over year figures and a quarterly sales increase of 4%.

Beacon research was expecting increases in the indexed and income annuity products, especially because indexed annuity cap rates are still desirable compared to other choices.  They were expecting declines in both types of fixed annuities because of low interest rates, but only saw a decline in one of them.  Fixed rate non-market value adjusted (MVA) annuities were the only category to decline, dropping 5%.  Fixed rate MVA’s actually increased 4%, probably because investors seeking higher yields were happy with the slightly higher rates offered.  Income annuities increased 30% and indexed annuities went up 18%.  Western National Life sold more than $2 billion in fixed annuities for the top spot, followed by Allianz and New York Life.

Written by Rachel Summit