Response: Sales of Indexed Annuities Soar in 2nd Qtr, Says Beacon
December 31, 2009 by Kerry Pechter
ORIGINAL ARTICLE CAN BE FOUND AT: Sales of Indexed Annuities Soar in 2nd Qtr, Says Beacon
I have just returned to the office to find your latest issue of the Retirement Income Journal. I have received a slew of emails today about your article, “Sales of Indexed Annuities Soar in 2nd Qtr, Says Beacon.” There are a number of insurance companies that are displeased with this article. In fact, there are numerous, quite egregious mistakes in this piece. I am contacting you on behalf of the companies that were offended by this article, and as a part of my efforts to “Set it Straight” when it comes to inaccurate media on indexed annuities.
First of all, indexed annuity sales were last up 4Q2008 (prior to the second quarter), so there has not been “a five-quarter decline” in the sales of these products. Also, indexed annuities were introduced in February of 1995 for your information.
Perhaps most importantly, Aviva is the leading provider of indexed annuities, not Allianz. Coincidentally, Aviva has been #1 in this market since 1Q2008.
The most damaging mistake you made was stating that Allianz indexed annuities pay “north of 10% in some cases.” This is blatantly false. In fact, the highest commission product that Allianz has pays 8% to the street level agent. Where on earth did you get such inaccurate information? In reality, there are only eight indexed annuities available that pay a commission of 10% or greater and Allianz does not offer a single one of them. It is because of reporters that do not do any fact-checking that we have such a bad reputation in this industry for selling “high-commission” products. If mistakes like yours above were not made, perhaps we would not be in this situation.
In addition, I can say with authority that Guaranteed Lifetime Withdrawal Benefits (GLWBs) are NOT driving the sales of indexed annuities. As the individual who first introduced those benefits to the fixed and indexed markets, I’ve tracked GLWBs since their debut in the indexed annuity market on 6/13/06. As I previously reported to you in my email dated 9/15/09 (attached), election rates of GLWBs are less than 50%, and the election rate has actually declined nearly 10% over the last quarter. I am the only firm that tracks these election rates, so I would think that I would be the only reliable source on the information.
I’d also like to bring to your attention that there are fewer companies in this market today, as opposed to a year ago, simply because many smaller carriers with low sales levels have exited the market. The costs of complying with SEC/FINRA, should indexed annuities become securities, are too high for companies doing less than $10 million in indexed annuities a quarter. These companies have not exited the market because of “decreased capacity!” Annuities are capital-intensive whether fixed, indexed, or variable. Each of the companies that have exited this market are still offering other types of annuities. The folks who left were never committed to the indexed annuity market, and merely offered the products as a companion to their primary product line, so that their agents would not sell a competitor’s indexed product. Why would you think anyone has exited this market because of capacity issues? Not one carrier has.
Lastly, and quite ignorantly, AIG has never been a “historic leader in indexed annuities.” The first time an AIG subsidiary entered the indexed annuity market in 2005. AIG was not ranked within the top 15 carriers at that time. They’ve never ranked higher since.
I’m quite frustrated right now. We provide you with regular sales data updates through our quarterly press releases. In light of this, I must question how can you report such inaccurate information? I am surprised that you didn’t seek me out for comment on these issues because of our relationship, Kerry. I guess you have learned that the best source IS the expert. I’ve been doing this for over a decade, and my indexed annuity expertise is unsurpassed at any other sales reporting firm. I am not trying to “toot my own horn,” but give you insight on my reliability. In the future, I’d carefully consider whether you want to work with a firm that estimates a large percentage of indexed annuity sales in their reports, or if you want to work with someone who reports 100% of indexed annuity sales.
Please let me know if I can be a resource for you on these issues in the future. It would certainly repair your image with the carriers in this market.
Sheryl J. Moore
President and CEO
Advantage Group Associates, Inc.
(515) 262-2623 office
(515) 313-5799 cell
(515) 266-4689 fax