Annuity FYI Blog

According to Investment News’ article “NY Life tops 2Q list of fixed-annuities sellers” by Darla Mercado, fixed annuity sales increased from the first quarter of this year to the second quarter.  With sales of $19.4 billion in the second quarter, fixed annuity sales increased 18% from the first quarter but went down 30% from last year.  New York Life Insurance Co. sold $1.74 billion of fixed annuities to nab the top sales spot.  Allianz Life Insurance Co. of North America had the second largest fixed annuity sales of $1.68 billion.  With sales of $1.61 billion, Aviva USA had the third highest sales.  AIG’s subsidiary Western National Life had the fourth highest fixed annuity sales of $1.29 billion, while the fifth highest sales of $1.05 billion were from American Equity Investment Life Insurance Co.

Many believe that the widening spread between fixed annuity rates and Treasury rates is accounting for the increase in fixed annuity sales.  The wider spread also makes it more profitable for insurance companies to handle fixed annuity business.  While fixed annuities have been harder to sell recently, there has been quite an increased interest in fixed indexed annuity products because of their cap rates.  Variable annuities have also seen a sales increase, according to multiple reports.  The $34.4 billion of variable annuities sold this past quarter was an increase from $31.8 billion last year.  New variable annuities sold this quarter totaled $6.22 billion, up from $6.14 billion last quarter.  An increased interest in both variable and fixed annuity products means that investors are looking for secure ways to ensure that their income lasts for the remainder of their lifetime.

New York Life Insurance Company had a great first half of 2010 thanks to their sales of long term care insurance, fixed annuities, and mutual funds.  According to Insurance News Net’s “New York Life Sees 47% Rise in Life Insurance Sales in First Half of 2010,” the largest mutual life insurer in the U.S. and its 11,500 agents will remain leaders in their marketplace.

The 47% increase in sales of individual life insurance is even in comparison to 2009′s all-time record sales.  Their Custom Whole Life insurance allows consumers to choose how long they pay their premiums.  Sales increases of permanent insurance and term products helped the growth this year.  Americans choose New York Life for their stability, guarantees, and exceptional agents.  Clients are choosing whole life policies because of the death benefits they offer as well as the cash value benefits you get while living.  New York Life has the largest portion of new life insurance premiums in the U.S.

With a record $870 million in new lifetime income annuity sales for the six-month period, New York Life is grateful to its sales agents and third party distribution channels.  Their fixed immediate annuity products have much value to offer both pre-retirees and retirees.  New York Life has recently had their financial security ratings affirmed by all four agencies so they are an obvious choice for the guaranteed lifetime income offered by fixed immediate annuities.  Long term care insurance purchases are also increasing because of the surge in health care issues associated with living a longer life.  New York Life’s mutual funds are seeing sales increases as well because of their widespread field of agents and distribution channels across the U.S.

Fee-based annuities are the newest in demand product, according to “Big insurers launching fee-based annuities” by Investment News’ Darla Mercado.  These simpler and lower-cost annuities are geared towards dually registered advisers.  One of the first products is Allianz Life Insurance Company of North America’s fee-based variable annuity.  The company just filed their request with the SEC and is looking into similar new products to release next year.

New York Life Insurance Co. is also looking to release a fee-based single-premium immediate annuity sometime this year.  While MetLife Inc. is looking into releasing a similar product, they don’t have anything definitive right now.  Traditionally, fee-based advisers have not shown much interest in annuity products.  After the financial crisis though, they seem open to products offering guaranteed lifetime income.  Some smaller insurers have had success in offering similar products to fee-based and fee-only advisers, but the sales account for a minuscule amount of the annuities market.  Time will tell whether large insurers will have similar success with fee-based annuities.

There are many options for these fee-based annuities.  New York Life offers a trailing basis-point commission instead of a one-time commission up front.  They also have an option where the annuity is in a managed account program similar to fixed indexed annuities.  Fee-based advisers are often looking for the lifetime income benefit without all of the other benefits annuities offer for an extra charge.  These fee-based annuity products may be just what they are looking for.

New York Life Insurance Company issued a press release about their number one status with women purchasing annuities.  In “New York Life is Top Provider of Retirement Income for Women,” they reveal that they were the top seller of immediate fixed annuities to women last year.  Of their $1.9 billion in sales, women accounted for sixty-four percent of that.  That’s not really a surprise since New York Life was the first company to offer women life insurance at the same cost as men back in 1894.  Women know that New York Life is a strong and trusted company, so they often choose to secure their future with them.

Women can be at a greater risk of outliving their money than men because of their increased life expectancies and the loss of traditional pensions.  They used to be advised to invest in risky products so that they could make enough money to finance retirement, but these strategies proved dangerous and too risky.  Many women choose 401k annuities to purchase with retirement income that they have built up over their careers.  With lower cost and risk and no chance of outliving your annuity payments, women tend to find annuities as safe alternatives to other investment options.

In “AIG Learns It’s All in the Name” from FinancialPlanning.com, we learn that taxpayers’ bailout dollars have helped AIG bounce back faster than many expected.  American International Group is one of the few insurance companies that has successfully come back from the financial mess it was in through creative branding.  It’s subsidiary was previously named AIG Annuity Insurance Co. but was switched this year to Western National Life Insurance Co.  That distancing from the tarnished brand name of AIG helped lead Western National to be the third quarter’s number one seller of fixed annuities through banks.  New York Life Insurance Co. does still hold the number one spot for the year, but believes it lost it’s third quarter spot due to low interest rates in the market.

Western National has been able to attract more annuity clients because they are offering higher interest rates than competitors.  They do this by making agreements with banks to lower the commissions they pay to the banks.  In turn, the banks receive more annuity clients after a couple years of clients shying away from the products.  Banks believe that the volume of fixed annuity customers they receive will make up for the lower commissions they are being paid by Western National.  While some other insurance companies may not think it is fair that AIG’s Western National is using government bailout money to cushion it’s higher interest rate offerings, that was part of the purpose for the bailout.  Companies should use that money in a way that they will become successful again and repay the bailout money to taxpayers.