Higher Interest Rates Contribute to Strong Annuity, Revenue Growth in 2nd Quarter

Second quarter annuity sales results were recently released and the news was good for many insurers.  In the Insurance News Net article, “Annuities Power 2Q Earnings Season,” Cyril Tuohy focuses on the positive numbers at four different companies.  Two of the main reasons that annuities had such a good quarter were higher interest rates and increasing fee income in portfolios.  AIG, Prudential, Fidelity & Guaranty Life and Symetra saw significant revenue and sales figures from their annuity products.

AIG’s indexed annuity business skyrocketed in the second quarter.  Their indexed annuity revenue of $305 million was almost six times higher than the $55 million of revenue in the second quarter last year.  Their variable annuity revenue increased 4% to $2.26 billion.  Their fixed annuity revenue of $1.1 billion was almost triple the revenue from the same time last year.  Guaranteed lifetime income benefits are still driving consumer demand at AIG.  They have also made some product changes and increased their distribution.  Their revenue increased 9% and their net income went up 13% from the same quarter last year.

Prudential had a similar experience with their revenue and net income.  Last year Prudential actually saw a net loss of more than $500 million in the second quarter.  This year, their net income increased to $1.04 billion in the second quarter.  Their chairman and CEO attributes much of this to fixed and variable annuity growth.  Prudential’s fixed and variable annuity account values increased from $141.47 million to $159.52 million when comparing year over year.  The popularity of fixed annuities, especially fixed indexed annuities, has helped insurers who sell life and annuity products do better than those who do not.

Fidelity & Guaranty Life’s annuity sales increased 45% in a year to year second quarter comparison.  The company sells fixed indexed annuities and index universal life insurance.  Their net income increased more than $3 million.  Fixed indexed annuity revenue was up 44% in the second quarter when compared to that quarter last year.  They work a lot with IMOs because of the company’s consistent fixed indexed annuity product offerings.  Fidelity & Guaranty has not made major changes to their product lines like MetLife and Prudential have, so IMO’s are happy to work with the consistency.  In addition to the new annuity that Fidelity & Guaranty introduced in March, they have two new products coming out this fall.

Symetra Financial’s net income increased from $45 million to $71.5 million in a second quarter year over year comparison.  Their revenue increased significantly in that time frame as well.  Deferred annuity revenue increased 47%, to $650.3 million.  Symetra’s income annuity revenue increased from $45 million in the second quarter of 2013 to $89 million in the second quarter of 2014.  Higher interest rates helped with their fixed and fixed indexed annuity sales.  The company also expanded their distribution network.

Increasing interest rates are just one of the factors contributing to strong annuity sales and revenue in the second quarter of this year.  AIG, Prudential, Fidelity & Guaranty and Symetra are four insurance companies who saw strong growth related to their annuity products.

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