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  • Wink: First-Quarter US Sales of Indexed Annuities Up 38.6%; Average Commission to Agents Rises

    May 27, 2014 by Fran Matso Lysiak

    PLEASANT HILL, Iowa – Total sales of indexed annuities in the United States jumped 38.6% in the opening quarter of 2014 from the same period a year ago, as the average commission to sales agents rose 5.8%, up slightly from last quarter’s average, according to Wink Inc. This represented the first increase in the average commission paid to the agent in nearly two years.

    First-quarter 2014 sales of indexed annuities increased to about $10.9 billion, according to Wink, a firm that tracks the data.

    2013 represented the fifth straight year that sales were up year over year, Sheryl J. Moore, president and chief executive officer of Wink and Moore Market Intelligence, previously told Best’s News Service, noting sales continued to rise since 2009. Sales of these retirement savings and income products last year rose to $36.8 billion, up 13.4% from 2012 (Best’s News Service, March 20, 2014) as two of the top five were now owned by private-equity firms, she said.

    In the first quarter, by company, Allianz Life Insurance Company of North America, a unit of Germany’s Allianz SE, once again remained the sales leader, with sales of nearly $2.8 billion and a 25.7% market share, according to Wink. Allianz has been No. 1 in sales since 2009. The company also was the leader in the agency sales channel.

    Capturing second place was Security Benefit Life Insurance, whose parent is Guggenheim, a private equity firm, with sales of $1.1 billion and a 10.1% market share.

    Ranking third were the American Equity companies, part of American Equity Investment Life Holding Co. (NYSE: AEL), with sales of $881.5 million. Coming in at No. 4 was Great American Insurance Group, with sales of nearly $772 million. Great American also led sales in banks.

    Rounding out the top five was Athene USA, formerly Aviva USA, with first-quarter sales of $571.8 million. However, it was the only company in the top five to show a decline in sales year over year — with about a 13.5% drop, according to Wink.

    Last October, private equity-backed Athene Holding Ltd., based in Bermuda, completed its acquisition of Aviva USA Corp. for about $1.55 billion. Aviva USA then became known as Athene USA. The deal included Aviva Life and Annuity Co. and Aviva Life and Annuity Company of New York. Athene Holding is owned by several institutional investors, with its largest shareholder being AP Alternative Assets, which is managed by Apollo Global Management, a private equity firm.

    Private equity firms are increasingly tapping into what they view as a potentially lucrative financial opportunity in fixed annuities, including indexed. These deals have come with their share of regulatory scrutiny, however.

    Last summer, Apollo Global agreed to the New York Department of Financial Services’s new policyholder protections as part of its affiliate Athene Holding’s then-planned buy of Aviva Life and Annuity of New York. The pact with New York made it the second company to agree to the safeguards, Superintendent Benjamin Lawsky said in a statement at that time. The department sought the extra protections because it highlighted a spike in private equity firms and other investment companies moving into the annuity business, a worrisome trend because those firms have business models that are more oriented for the short-term than traditional insurers.

    Guggenheim agreed to a similar set of protections last June as part of its then-plan to buy Sun Life Insurance and Annuity Company of New York. New York’s review of private investors as owners of annuity businesses delayed Sun Life Financial’s closing on the sale of its U.S. annuities business and some life insurance businesses, which was completed July 31, 2013.

    Earlier this month, New York proposed new regulations it said would increase policyholder protections as they apply to private equity purchases of insurers, especially life insurance and annuity companies. The reforms include more transparency and a higher financial standard and based on conditions the department required during several individual transactions last year.

    With indexed annuities, a type of fixed annuity, the insurer invests most of the customer’s principal in bonds to ensure the policy will generate a small annual return but uses a small portion of the premium to buy options in a stock market index, usually the S&P 500. Options that are exercised can result in additional interest credited to a policy, potentially more than an investor might achieve through other fixed-income investments.

    Total sales were down nearly 6% from last-year’s fourth-quarter, according to Wink.

    Allianz Life Insurance Company of North America currently has a Best’s Financial Strength Rating of A (Excellent).

    (By Fran Matso Lysiak, senior associate editor, BestWeek: fran.lysiak@ambest.com)

    Originally Posted at A.M. Best on May 21, 2014 by Fran Matso Lysiak.

    Categories: Sheryl's Articles
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