American Equity Not Giving Up on IMOs for FIA Sales

This morning, the president of American Equity Investment Life Insurance Co. stated that the company will not steer sales away from the independent agent channel amidst a drop in fixed indexed annuity (FIA) sales. According to a recent InsuranceNewsNet article, FIA sales at the company fell to $5.7 billion in 2016, 16% less than the previous year, but executives were quick to blame competition from Security Benefit Life and Athene USA. Industry tracker LIMRA Secure Retirement Institute reported an overall reduction in the indexed annuity market in the fourth quarter of last year when sales dropped 13% to $14 billion.

Ron Grensteiner, president of American Equity said that the FIA sales slowdown has “nothing to do with us pulling back from the independent channel. We’ve never indicated we were going to pull back.”

Independent marketing organizations (IMO) and the independent agents they recruit are responsible for 60% of all FIA sales. But the Department of Labor’s (DOL) new fiduciary rule threatens to change that trend with its requirement that FIAs be sold under a “best interest” contract threshold, also referred to as BICE. This would require a financial institution to certify the sale by agents, however IMOs are not considered financial institutions. Currently, the DOL is considering how to offer IMO’s a pathway to becoming such institutions, but in the meantime, the rule is causing quite a stir in the industry.

Last year, CEO John Matovina said that American Equity would not sign a best interest contract because the liability to the insurer was too great.

“Signing the best interest contract in the IMO channel adds substantial risk. Agents in that channel are independent and can sell from multiple insurance companies,” Grensteiner stated. “But that does not mean we’re not going to pay any attention to the independent channel,” he continued.

On the other hand, Matovina acknowledged, in a news release issued last year, that banks and broker/dealers represent a “key initiative” for American Equity, as these channels represent “a significant growth opportunity” for sales of FIAs.

The Department of Labor considers banks and broker/dealers as financial institutions. American Equity’s Eagle Life Insurance Co. is the subsidiary that provides annuities to both broker/dealers and banks.

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