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Many New Players in the Fixed Indexed Annuity Game

Before the final DOL ruling which included indexed annuities in the BICE rule requirements, indexed annuity products were the hottest news in the annuity industry. Sales skyrocketed in 2015 and many companies who weren’t big players in the industry before came onto the scene strong. Insurance News Net’s Cyril Tuohy wrote about the top selling companies and channels in the article “Crashing The FIA Party: Not Just The Top Companies Driving Growth.” It remains to be seen what will happen in the fixed indexed annuity industry now that the DOL ruling has been finalized, but it’s interesting to look back on the year that was and see all of the new companies that entered the game.

The majority of insurance companies and other annuity carriers sold more fixed indexed annuity products in 2015 than they did in 2014. Some of the highlights were very interesting. Integrity Life’s sales of $610 million were a 1,080% increase from the previous year. They are a subsidiary of Western & Southern Financial Group. Nationwide’s sales increased 460% last year, earning them the 6th highest spot with $2.4 billion in sales. Their New Heights 12 and New Heights 9 indexed annuities soared in popularity in 2015, knocking Security Benefit’s Secure Income Annuity and Total Value Annuity off the top ten sellers list. Forethought Life sold $1.5 billion in indexed annuities last year, which was 225% higher than their 2014 sales. Sentinel Security Life’s indexed annuity sales increased 109% year over year to $100 million. AIG also had a notable increase with indexed annuity sales of $3.3 billion in 2015. That was a 162% increase from 2014.

One of the reasons that AIG is having such high sales is that they sell through multiple distribution channels. Field Marketing Organizations have typically been the main distributors of fixed indexed annuities, but we are seeing a lot of companies enter the indexed annuity market that don’t sell through FMO’s, but through banks and broker-dealers instead. Pacific Life, Lincoln National and Nationwide have been creeping into the indexed annuity market lately. They are all a strong presence in the variable annuity industry, but started focusing on indexed annuity products because of the impending DOL fiduciary rule. Pacific Life’s FIA sales increased 65% to $1.36 billion in 2015. Sales at Lincoln National were up 38% to $1.34 billion. We’ll see where their focuses go after the final ruling included both variable and indexed annuity products instead of only the variable type.

Allianz Life kept their top indexed annuity sales spot year to year, but saw their sales decline to $8.7 billion in 2015 from $12.7 billion in 2014. Their market share decreased from 27.1% to 16.4%. This is partly because of gains by AIG, American Equity and Great American Insurance. But Allianz also made some purposeful decisions to decrease their sales and in turn, some of the risk that the company was carrying. Overall fixed indexed annuity sales increased 13.1% in 2015, to a total of $53 billion. The top three sellers accounted for 36.2% of the market share in the fourth quarter of last year, down from the 42.6% they held in 2014. Many more insurance companies helped the increasing sales of fixed indexed annuity products in 2015. It wasn’t just the top players like it has been in the past. Indexed annuities grew at twice the rate that fixed annuity products did. Some experts wondered if there would be enough supply to keep up with the rapidly increasing demand for fixed indexed annuities after their successful 2015. Now that FIA’s have to follow the BICE guidelines set by the DOL, we’ll have to see what happens with sales supply and demand this year.

Banks and broker-dealer distribution channels have contributed greatly to increasing indexed annuity growth. Annuity sellers with strong relationships with these channels are some of the companies seeing large growth. Banks sold just $3 billion worth of indexed annuities in 2012, a number that increased to $9 billion by last year. Symetra Financial has a strong relationship with the bank channel and had indexed annuity sales of $2.3 billion in 2015, an increase of 51% over the past year. Low interest rates have made FIAs more desirable for the bank clientele. Indexed annuities sold to the more conservative bank customers tend to be a plainer version without GLWBs and with fewer crediting options. The independent broker-dealer channel is going through a similar situation. Their sales were $1 billion in 2012 and $7 billion in 2015. This channel accounted for 16.7% of indexed annuity sales in the fourth quarter of last year, an increase of 6.5% since the fourth quarter of 2014. The top selling companies through this channel are Allianz Life, Voya, and Nationwide. Products sold through this channel typically have guaranteed income benefits and more bells and whistles than those sold through the bank channel.

Many different companies, including some new players, accounted for the increasing fixed indexed annuity sales seen in 2015. There were also significant increases through different distribution channels. After the DOL fiduciary rule included indexed annuities in their BICE guidelines, we aren’t sure what will happen with these products throughout 2016.

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