Guggenheim Partners LLC is emerging as a winner in the indexed-annuity market and seems poised to snap up even more business.
The asset manager is expanding its footprint in annuities through acquisitions: Late last week, it purchased the U.S. fixed annuity business of Canadian carrier Industrial Alliance Insurance and Financial Services Inc.
So far, Guggenheim's investments appear to be paying off. EquiTrust Life Insurance Co., which it acquired last October, brought in $197 million in indexed annuity sales in the second quarter, up 28% from the year-earier period, according to AnnuitySpecs.
Security Benefit Corp., which Guggenheim bought in July 2010, soared to fourth place among indexed-annuity sellers during the second quarter, a remarkable increase considering the insurer started selling the products only last year — and is competing against such established rivals as Allianz Life Insurance Co. of North America and Aviva USA.
Security Benefit picked up $645 million in indexed-annuity sales during the second quarter, garnering a 7.5% market share, according to data from AnnuitySpecs. That total is up by 240% from the year before. Though Allianz remains the number one carrier in indexed annuities with a 16% market share, Security Benefit's Secure Income Annuity was the top-selling product for the quarter.
Observers note that Security Benefit's distribution arrangement with Advisors Excel LLC, an independent marketing organization based in its headquarters city of Topeka, Kan., is really behind the insurer's steep rise in sales. The Secure Income Annuity is available exclusively through independent insurance producers who have an affiliation with Advisors Excel.
Security Benefit is also offering attractive features at a time when insurance carriers are rethinking their annuities because of the low-interest-rate environment. The Secure Income annuity features a generous 10-year surrender period, a 7% compound roll-up and an 8% bonus.
“Today's typical product has a 5% roll-up and a 4% premium bonus,” said Sheryl Moore, chief executive of Moore Market Intelligence, which owns AnnuitySpecs. “Advisers have been feeling like they've been cut off at the knees because carriers are taking away competitive features.”
Features have also taken a backseat to ratings as a major factor in advisers' decision to opt for a particular carrier, Ms. Moore said. Security Benefit has seen its ratings rise since the Guggenheim transaction — A.M. Best Co. Inc. has its financial strength rating at B++, up from B in 2010 prior to the acquisition.
“Traditionally, people didn't sell much for companies that were rated less than A, so even those that were A- struggled because the guarantees are only as good as the claims-paying ability of the insurer,” said Ms. Moore.
“But there's been a big shift in the mentality of brokers, where the top concern for producers used to be financial strength,” she added. “Now the No. 1 thing that helps them determine who to contract with is the competitiveness of the product.”
Michel' Cole, a spokeswoman for Security Benefit, did not provide comment.