Further evidence of the recent boom in buffered variable annuity sales has surfaced in the form of third quarter numbers released by Allianz. According to a recent InsuranceNewsNet article, the financial services company claims that sales of these annuity products increased by an impressive 62% when compared to the previous year. Such numbers show that advisors have warmed to the product line in an otherwise struggling variable annuity market.
Allianz also reported that fee income from asset flows into Pacific Investment Management, owner of Pacific Life Insurance, also grew steadily in the third quarter. According to CFO Dieter Wemmer, the new products developed by Allianz Life were created in response to a low interest rate environment. Buffered variable annuities are viewed as much simpler than some of their cousins, sticking primarily with index allocations, few subaccounts, no living benefits and no lifetime income riders. Terms are often shorter and policyholders are protected against losses beyond a protection buffer offered by the insurer. They are also known as structured variable annuities.
From the insurer’s prospective, buffered variable annuities are “capital-efficient,” requiring less capital to support than traditional life and annuity products. They are typically sold by broker/dealers while indexed annuities, another product, are sold by independent agents.
When asked if buffered annuities were “taking over” from the company’s indexed annuities, Giulio Terzariol, Allianz’s new CFO come January, said there was no cannibalization between the two channels.
At the end of the second quarter, sales of buffered variable annuities held about 7% of the entire variable annuity market, or $1.8 billion. The Department of Labor’s fiduciary rule, which had been weighing down Allianz Life in the first half of the year, is no longer a major impact after it was decided to delay implementation until July 1, 2019. Overall, Allianz posted a 17% drop in third quarter net income to $1.9 billion, due to hurricane and fire-related losses in the company’s property/casualty sector.
Written by Rachel Summit