Workers expect their defined contribution plans to play a greater role in their retirement income than annuities.
By Cyril Tuohy
American International Group (AIG) Life and Retirement Division, which includes its life and annuities business, delivered sales of $7.4 billion in premiums and deposits in the second quarter, an increase of 9 percent compared to the year-ago period.
Index annuities sales were $305 million in the quarter, up from $55 million in year-ago period, and variable annuity sales reached $2.26 billion, up $90 million or 4 percent compared to the year-ago period, the company said.
“Both lines benefited from product enhancements, expanded distribution and continued strong demand for guaranteed lifetime income benefits,” Jay Wintrob, president and chief executive officer of AIG Life and Retirement, said in a conference call with analysts.
Fixed annuity sales reached nearly $1.1 billion in the second quarter, tripling from the year-ago period, the company also said.
AIG, which has a property-casualty and a mortgage guarantee division, reported second quarter net income was $3.07 billion, an increase of 13 percent compared to the year-ago period.
Wintrob said that low interest rates have made fixed annuities competitive compared to bank certificate of deposits and money market products. New features added to some of AIG’s life insurance products have also led to “strong sales momentum,” he said.
In May, AIG launched Elite Survivor Index II, a joint and last survivorship index universal life insurance policy.
In March, the company launched Elite Index II, a universal life insurance with simplified guarantees and an optional chronic illness benefit rider.
Wintrob said AIG’s Retirement Income Solutions division would not likely be able to keep up its strong sales pace going into the third and fourth quarters given the strong market performance during the last six months of 2013.
The Standard & Poor's 500 index finished last year up nearly 30 percent. In the first six months of this year, it gained 6 percent.
“Without similar market conditions in the second half of this year, we would expect lower sales growth rates in key product lines versus the prior year,” he said.
Market performance and interest rate direction notwithstanding, demand for the company’s retirement income products “remains very strong,” Wintrob also said.
AIG made a push into the retirement business following the pullback by other annuity carriers in the wake of the financial crisis and dropping interest rates.
Following the collapse, many traditional carriers found themselves saddled with expensive guarantees they had made to annuitants before the recession. Annuity carriers found it hard to deliver on those promises when their fixed-income investment portfolios were yielding so little.
That created an opportunity for AIG, itself a once-hobbled industry giant.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at firstname.lastname@example.org.
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