Guggenheim's Security Benefit Life climbs among top fixed-annuity players

Hot third-quarter indexed-annuity sales help propel industry, PE-backed insurers show staying power

Dec 4, 2012 @ 2:57 pm

By Darla Mercado

Security Benefit Life Insurance Co. helped push indexed-annuity sales to record levels in the third quarter, illustrating that offerings from private-equity-owned firms are no flash in the pan.

The Guggenheim Partners LLC-backed insurer made its first showing on the list of the top five overall fixed-annuity players, with $1.03 billion in total fixed-annuity sales in the third quarter, according to data from Beacon Research Publications Inc.

No. 1 for the period was Allianz Life Insurance Co. of North America with $1.31 billion, followed by Aviva USA with $1.064 billion, New York Life Insurance Co. with $1.06 billion and Security Benefit. American Equity Investment Life Holding Co. rounded out the top five with $982 million.

Overall, fixed-annuity results dropped 13% from the 2011 third-quarter levels to $26.6 billion.

However, indexed annuities and income annuities picked up the slack, with $8.7 billion sold during the third quarter, up 0.5% from the year-earlier period. Income annuities, meanwhile, accounted for $2.4 billion in sales, boosted largely by sales of deferred-income annuities.

Both product lines are pulling record level sales year-to-date, with indexed climbing 4.5% to $25.7 billion and income annuities rising 9% to $6.8 billion.

Judith Alexander, director of sales and marketing at Beacon, noted that without Security Benefit Life's growth, year-to-date indexed-annuity results would have declined from last year's levels, but instead, they were up by about $1.1 billion.

“Security Benefit is primarily offering competitive guaranteed-lifetime-withdrawal benefits,” she said.

There are inherent benefits to being a private-equity-owned insurer in this product line, Ms. Alexander said.

“Private-equity-owned companies have the advantage of being private. They are responsible to their investors, but they can afford to operate with less of a quarter-to-quarter focus than the stock companies,” she explained. “Many also have larger investment operations than most of the longtime players in the fixed-annuity market.”

To further illustrate the growing presence of private-equity firms in the indexed-annuity space, year-to-date through the third quarter, companies owned by these firms accounted for 9% of total fixed-annuity market share, compared with 2.8% over the comparable period in 2011.

The difference is even more pronounced when looking at indexed annuities, where private-equity-owned insurers accounted for 15.4% of market share, compared with 5% in 2011, according to Ms. Alexander.

Apollo Global Management LLC already backs Athene Annuity and Life Assurance Co., while Harbinger Group Inc. bought Fidelity & Guaranty Life Insurance Co. last year. In addition to Security Benefit, Guggenheim owns EquiTrust Life Insurance Co. and is reinsuring annuities from Standard Life Insurance Co. of Indiana.

The rapid growth of carriers owned by private-equity firms has prompted some producers to raise concerns that these insurers are offering attractive products that don't reflect the reality of today's low interest rates.

Analysts at ratings agencies have indicated that due to their in-house investment expertise, these firms have sought bigger returns through triple-B-rated bonds and heavier allocations toward residential-mortgage-backed securities.

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