Although some insurance company executives say they are now using analytics, others say they’re still on the fence about it or only beginning to explore its possibilities.
By Linda Koco
Athene USA tried to hold its ground in first quarter 2014 fixed index annuity (FIA) sales. It sold more than $571.8 million, qualifying it to be one of the quarter’s top five sales leaders, according to Wink, Inc. However, the carrier still registered a sales decline from the previous quarter and also from first quarter last year.
This happened in the same quarter, during which top sales leader Allianz Life thundered in at more than $2.8 billion, registering a stunning 142 percent gain over first quarter last year, according to Wink figures.
Despite Allianz’s spectacular gains, Athene’s numbers are the ones that annuity professionals want to know about right now. That’s because Athene swallowed FIA mega-player Aviva USA in October; the sales losses it suffered during its highly publicized merger and acquisition rumpus became a heads-up for future inquiry.
Viewed against its own target, Athene looks to be on its way to achieving its projected $2-$3 billion in total annuity sales for all of 2014. If Athene’s indexed sales merely replicate first quarter results in the following three quarters, the carrier will have sold roughly $2.3 billion in indexed products by year end. Since the company also sells some single premium immediate annuities and multi-year guarantee annuities, the total will be slightly higher.
In terms of industrywide sales, the carrier came in fifth place on Wink’s list of first quarter FIA sales leaders. That’s the same position it held at year-end 2013.
On Wink’s list of top companies in the independent agency channel, Athene took fourth place in first quarter, better than in fourth quarter 2013, when the carrier did not make that list at all.
Overall, Athene sales were down 15 percent from the previous quarter and down 13 percent from first quarter last year, according to Wink. By comparison, the overall industry experienced a 5.8 percent decline in sales compared to fourth quarter — but nearly a 39 percent increase over first quarter last year.
It’s likely that Athene will pick up steam as the year wears on, Sheryl Moore said in an interview. The president and chief executive officer of both Moore Market Intelligence and Wink, Moore has been watching the carrier for signs of potential hiccups as it begins its new life.
“It can take a couple of quarters for a company to get its bearings following an acquisition,” Moore said. But once things are running smoothly, she expects Athene’s sales to start growing, probably in second quarter, she said.
Competition is growing
If the company does increase its sales this year, as Moore predicted, it will happen in the face of increasing competition. Carriers are making enhancements to their products to stimulate sales, she said.
For instance, the average commission paid to the sales agent has gone up — to 5.9 percent in first quarter from 5.6 percent in fourth quarter, according to Wink’s Sales & Market report for first quarter. The report also shows that sales involving products paying 7 percent to 8.99 percent in commission have accounted for an increasing share of sales over the last four quarters, reaching about 55 percent share in first quarter.
“It’s a sign that carriers are slowly getting their products back to the way they were before the market collapse in 2008,” when commissions were in the 8 percent range, Moore said.
To accomplish the increases, several carriers have introduced “commission bonus programs.” The predominant increase to agents who qualify is 0.5 percent, but this can vary. The carriers are introducing this cautiously, Moore said, “so they won’t have to claw back the increases if market conditions should decline later in the year.”
Even so, the fact that the average is up — at all — is a sign of increased competition.
In addition, carriers are increasing the cap rates, participation rates and fixed account rates in their products, according to Moore. This is a reflection of the modest improvements seen in 10-year Treasury rates, she said, and distributors are responding to the changes by advertising they now have “uncapped annuities.”
Another increase has occurred in the premium bonus percentage that many carriers pay to policyholders. The carriers have started increasing this percentage, and that stimulates sales, Moore said. (The premium bonus range in first quarter was 0.50 percent to 12 percent.)
Not all companies offer bonus products. In fact, in first quarter, the percentage of FIA sales with a bonus actually declined, to 66 percent from 75 percent in fourth quarter, according to Wink. But those that do offer the products are carriers in the independent agent channel, where bonus annuities sell very well and competition is keen.
Another trend in the competitive environment is the rising sales of fixed index annuities through banks and wirehouses. Banks increased their share of sales to 13.5 percent in first quarter, almost twice the 7.6 percent share they held in first quarter 2013, according to Wink. Meanwhile, wirehouses more than tripled their share, to 4.3 percent from 1.3 percent in the same year-earlier period.
Products sold in these channels tend to pay lower commissions and have shorter surrender charges than products sold in the independent channe). They also tend to be issued by carriers rated A- or higher, and omit premium bonuses, Moore said, noting that some carriers definitely want to be players in this market.
The long view
Overall, Moore takes the long view in assessing the first quarter decline in industrywide sales. First quarter sales are normally “abysmal,” she said in a statement. That’s because fourth quarter sales tend to be high as agents rush to complete sales before year-end. “However, when you consider that this was second-greatest quarter ever for indexed annuity sales, it was a pretty good quarter!”
Linda Koco, MBA, is a contributing editor to AnnuityNews, specializing in life insurance, annuities and income planning. Linda may be reached at email@example.com.
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