By Linda Koco
Top-selling fixed index annuity (FIA) writer Allianz Life turned in some jaw-dropping sales numbers for first quarter. Its total FIA sales hit nearly $2.8 billion, up 142 percent from the $1.1 billion it reported for first quarter last year, according to Wink Inc. The company’s FIA market share is now 26 percent, up from nearly 15 percent in first quarter last year.
The question is, why? First, the big picture.
The Minneapolis company’s performance far overshadowed that of second place Security Benefit Life, which came in at $1.1 billion in first-quarter FIA sales, for a 10 percent market share.
Being in first place is a norm for Allianz Life. It has been the FIA industry’s sales leader for 13 of the past 17 years, according to Wink, an FIA product resource.
But Allianz Life has been on a tear since the latter part of 2013. In fourth quarter, its FIA sales totaled $2.3 billion, according to Wink. (Numbers are rounded.) That was well above the carrier’s “normal” quarterly range of $1.2 billion to $1.4 billion in recent years. For instance, the company’s FIA sales for third, second and first quarters last year were $1.3 billion, $1.3 billion and $1.2 billion, respectively. The total for first quarter 2012 was $1.4 billion.
Another item of note is that four Allianz Life FIAs made Wink’s top 10 list of FIA sales leaders in first quarter. That’s up from two Allianz Life products on the list in first quarter last year and just one product on the list in fourth quarter last year.
The carrier also pulled rank in three of the four distribution channels tracked by Wink in first quarter. Based on FIA sales, it took first place in the agency channel, second in the wirehouse channel and third in the bank channel.
By comparison, in fourth quarter 2013, it ranked high in only one of those channels — agency, where it came in first. That’s up from first quarter of that year, when the carrier ranked fifth in the agency channel.
What’s behind it?
Clearly, something has stirred the sales engine at Allianz Life. But what?
Some outsiders believe that market conditions contributed to greater sales. According to this interpretation, the FIA industry has been readjusting to Athene USA’s takeover of Aviva USA in October. During the transition period, these individuals say, former Aviva producers and distributors have been placing more business with Allianz Life than previously. And since economy-related uncertainty still prevails among FIA buyers, some advisors recommend going with a winner — i.e., the top-selling FIA carrier.
Others believe the company’s Allianz Preferred sales platform is a major factor. Introduced nearly three years ago, the platform includes field marketing organizations (FMOs), broker/dealers and financial professionals who commit to meeting certain sales, training, regulatory and other requirements. In return, the platform partners are allowed to sell certain “exclusive” FIAs, and be eligible for bonus compensation too — both seen as key drivers for sales.
The preferred platform is not exactly small. Last fall, for instance, the company reported more than 8,000 producers and more than 30 FMOs were preferred. Some non-preferreds view that as competitive clout.
Tom Burns, chief distribution officer at Allianz Life, offers still another perspective. Two years ago, he said, the company began a strategy to go after FIA distribution by broker/dealers and their registered representatives. This is a trend that is now showing up in the sales numbers.
To industry insiders, the rep-seeking strategy was surprising. During the first decade of this century, broker/dealers had campaigned hard to have FIAs regulated as securities, not insurance. When the Harkin amendment in the Dodd-Frank Act of 2010 quashed that goal, many industry professionals just assumed that the registered market would exit FIA distribution once and for all.
That was yesterday. Today, said Burns in an interview, the registered reps have an “appetite” for the products, and many broker/dealers have their “arms wide open” to FIAs.
In fact, he sees so much appetite in this channel that he is predicting “second quarter numbers will better than first quarter.”
He is predicting growth for the overall FIA market too. For instance, in the “next few years,” he said, industrywide FIA sales could grow from today’s annual total of $30-40 billion to an annual total of $100 billion. Meanwhile, he predicted, variable annuity sales will contract due to “baggage” from the financial crisis of 2008-2009 and to manufacturer desire to have “more balance” in variable, indexed and fixed production.
But mostly, he said, growth in FIA sales will be driven by production from registered reps.
The appeal among reps
Burns offered several reasons for this prediction. One is that reps are using FIAs for clients who want a sure lifetime income, he said, explaining that many people today are “grabbing” for income solutions and they are looking for strategies from their registered reps.
To meet that demand, Allianz Life sells some FIAs with a decided income focus in this market. For instance, the Allianz Core Income 7 includes an income benefit rider that lets policyowners choose level income payments for life or payments having the potential to increase each year.
Another draw for reps is having access to a managed volatility option, such as the Barclay’s/Lehman. Registered reps are familiar with Barclays, Burns said, so they view availability of such an option inside a FIA as a plus. This is showing up in sales. According to Wink, FIAs with a Barclays/Lehman option represented 20 percent of all FIA production in first quarter. That’s up from 0.5 percent in first quarter 2013.
Allianz is one of the few FIA carriers that currently offer such an option. This is the exclusive Barclays US Dynamic Balance Index. The company markets it as an uncapped strategy inside certain FIAs, which typically include other, more traditional index options too.
This option may have contributed to the strong sales of three Allianz Life products in first quarter. These are the Allianz 360 Annuity, Allianz 222 Annuity and Allianz 365i Annuity, all of which have the Barclays option and all of which appear on Wink’s top 10 list of FIA products for the quarter.
The company continues to dominate FIA distribution through independent agents, including agents in the Allianz Preferred platform. Hence its first quarter ranking as the No. 1 seller of FIAs in the agency channel.
But the carrier is also interested in expanding sales in the wirehouse and bank channels, Burns said. Both of those channels want products with shorter surrender periods than the 10-year period used in policies sold by independent agents, and both channels want products where the main drivers are accumulation or income. So, last fall, the company brought out two FIAs to fit the bill. Both have a shorter surrender charge period (seven years), and while one (Allianz Core Income 7) has an income focus, the other (Allianz Signature 7) has an accumulation focus.
So far, overall sales continue to favor the agent-sold 10-year policies — the 360, 222 and 365i FIAs, all of which appear on Wink’s top 10 products list for first quarter. But because the carrier already has captured second place in the wirehouse channel and third place in the bank channel — albeit on smaller volume — it could be that future production will look a lot different.
Linda Koco, MBA, is a contributing editor to AnnuityNews, specializing in life insurance, annuities and income planning. Linda may be reached at [email protected].
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