Wink CEO: Independent Organizations Marketing Annuities Getting Regulatory Cautions From Kansas, Iowa
December 3, 2014 by Fran Matso Lysiak
PLEASANT HILL, Iowa – Insurance regulators in Iowa and Kansas have turned their eye to organizations marketing insurance products/annuities, according to the chief executive officer of Wink Inc., a firm that tracks sales of indexed annuities.
Both state’s regulators have drafted bulletins cautioning marketing organizations about marketing and advertising, Sheryl Moore, president and CEO of Wink and Moore Market Intelligence, told Best’s News Service. This is “extraordinary” as a marketing organization is a third-party distributor that works between the insurance company and the salesperson, Moore said. “We haven’t seen marketing organizations addressed by regulators in the past.”
Total third-quarter 2014 U.S. sales of indexed annuities rose to $11.49 billion, a 14.3% increase from the same period a year ago, according to Wink. Sales of these retirement savings and income products were down 8.5%, however, when compared with the second quarter.
Second-quarter sales were the highest the industry ever experienced, beating the previous record by 8.85%, Moore said. As a result, sales were down from the prior quarter she said but noted it’s “hard to consistently perform.”
By company, Allianz Life Insurance Company of North America, a unit of Germany’s Allianz SE once again maintained its position as the No. 1 seller, with third-quarter sales of $3.08 billion and market share of 26.8%, according to Wink.
Recapturing their prior ranking in second place were American Equity companies, part of American Equity Investment Life Holding Co. (NYSE: AEL), with sales of $1.08 billion. Falling to third place was Security Benefit Life, whose parent is Guggenheim, a private equity firm, with sales of $943.7 million. Coming in again at No. 4 were companies of Great American Insurance Group, with sales of nearly $687.8 million. Rounding out the top five once again was Athene USA, formerly known as Aviva USA with third-quarter sales of $643.6 million, according to Wink.
Private equity-backed Athene Holding Ltd. based in Bermuda, last October completed its acquisition of Aviva USA Corp. for about $1.5 billion. Athene Holding is owned by several institutional investors, with a large shareholder being AP Alternative Assets, which is managed by Apollo Global Management, a private equity firm.
Year-to-date sales “are greater than they have been in any full year with the exception of 2013’s record-setting sales,” Moore said in a statement.
With indexed annuities — a type of fixed annuity — an 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.
As to the ongoing low interest rate environment and impact on insurers overall, Moore said fixed annuities that have minimum guaranteed credited rates can cause strain on insurers when prevailing interest rates drop below the level of the minimum guaranteed credit rates of those annuities. For example, if an annuity credits of minimum rate of 4% but the insurer is only earning 3% on their bonds, it can be a strain on the books of the insurer, she said. Ultimately, though, Moore told Best’s News Service this isn’t as big of a concern for insurers that sell indexed annuities.
Allianz Life Insurance Company of North America currently has a Best’s Financial Strength Rating of A (Excellent).
