Nationwide, AIG see huge gains in fixed indexed annuity sales; Allianz and Security Benefit flounder

Nationwide's sales jumped 460% in 2015 as a new product and distribution partnership has begun to bear fruit

Mar 24, 2016 @ 1:35 pm

By Greg Iacurci

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Nationwide and American International Group saw sizable gains in fixed indexed annuity sales last year, jumping into the Top 10 sales leaderboard and reaping the benefits of a market appetite for indexed annuities that only seems to be growing.

Other insurers, though, faltered compared to their standing in 2014. Allianz Life Insurance Co. of North America maintained its hold on the No. 1 sales spot, despite a 31% dip in sales over the prior year, and Security Benefit Life Insurance Co. almost fell out of the Top 10 following a 56% drop, according to data from market research firm Wink Inc.

A confluence of factors, such as market volatility, low interest rates and elevated distribution among channels that previously shunned such annuities contributed to a record year for fixed indexed annuity sales in 2015, which reached $54.5 billion.

Fourth-quarter sales of $16.1 billion were the highest-ever, besting the $14.3 billion set over the prior three-month period.

NATIONWIDE'S SALES SOAR

Nationwide's sales ballooned 460% over 2014 to hit $2.49 billion. That spike — which made the insurer No. 6 in sales, compared to No. 23 the year prior — was due largely to product development and a new distribution partnership with Annexus, a field marketing organization.

Nationwide partnered with Annexus in February 2014 to roll out a new fixed indexed annuity, called New Heights, an addition on another Nationwide offering called Clear Horizons.

“We're just starting to see the fruits of our labor in that [Annexus] partnership,” said Mike Morrone, associate vice president of fixed annuity product strategy at Nationwide.

Top 10 fixed indexed annuity sellers, 2014-2015
Source: Wink Inc.

Originally, Nationwide debuted the New Heights product in one version, but re-launched the product suite in June 2015 to include four versions catering to various distribution channels (banks, wirehouses, independent broker-dealers and independent market organizations), Mr. Morrone said.

“They always had a kind of standard fixed indexed annuity, and we here didn't feel a ton of promotion. It was kind of like, 'Hey we have this. If you want to play in that space, we're there for you,'” said Judson Forner, director of investment marketing at independent broker-dealer ValMark Securities Inc., describing Nationwide's approach to the fixed indexed annuity market prior to the New Heights annuity.

The new product came with the option for income and death benefit riders, and also offered an uncapped interest crediting option on the index, an index option that's become more popular, Mr. Forner said. That kind of flexibility with product features is attractive from a distribution standpoint, he added.

AIG WINS AGAIN

AIG, another big winner in 2015, saw indexed annuity sales jump 162% over 2014, to $3.3 billion.

“They have been a product machine over past few years and have been forging a lot of new [distribution] relationships, which has helped to increase their market share significantly,” according to Sheryl Moore, president and chief executive at Moore Market Intelligence.

AIG has developed FIA products that appeal to all distribution channels, which is “very irregular in the fixed indexed annuity market,” Ms. Moore said.

The firm has three subsidiaries — American General Life, Variable Annuity Life Insurance Co. (VALIC) and United States Life Insurance Co. in the City of New York — that, combined, manufacture 30 different indexed annuity products (26, 3 and 1, respectively), said Ms. Moore.

AIG spokeswoman Jennifer Hendricks Sullivan didn't return a request for comment.

A 'STEP BACK' FOR SECURITY BENEFIT

Security Benefit, which held the No. 2 spot on the sales leaderboard in 2014, fell to No. 10 in 2015, with total sales of $1.8 billion.

The firm pulled one of its fixed indexed annuities with a guaranteed income rider off the market for a period of time last year, which “no question” had a negative sales impact, according to Cody Foster, co-founder of Advisors Excel, a field marketing organization that distributes FIAs, including those of Security Benefit. (The insurer has since put the product back on the market, and Advisors Excel has seen sales increase.)

Over 2014-15, Security Benefit also reduced payouts on a few of its fixed indexed annuity products, which was “a clear message to their distributors in how interested they were in getting additional premium on those products,” Ms. Moore said.

Security Benefit spokesman Peter MacKellar didn't return a request for comment.

American Equity was one insurer that partly benefited from Security Benefit's dip, some said.

“As Security Benefit took a step back last year, I think American Equity was kind of one of the natural benefactors of that,” Mr. Foster said. The insurer gained 67.5% in sales flows to hit $7 billion, second only to Allianz.

Allianz's 31% slide saw sales decrease to $8.7 billion in 2015 from $12.7 billion the year prior.

Speculation is that the dip was partly intentional, in order to control the amount of underwritten policies in a risk-management play.

“It was a planned strategy,” according to Ms. Moore. “They could have sold more if they wanted.”

Allianz spokesman Jeff Faust didn't return a request for comment.

Allianz had made small adjustments to various “ancillary” fixed indexed annuity product features — increases in rider fees and an increase in spreads on uncapped index versions, for example — which was likely done to keep risk metrics in line, Mr. Forner said.

“We saw the products change and become slightly less robust, and generally speaking in this industry when changes are made it's to maintain some type of profitability and keep pricing in line where it needs to be from a risk perspective,” he added.

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