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Move over, double-takes. Given that fixed index annuity (FIA) sales have broken yet another quarterly record, and by a wide margin, triple-takes are in order. Hybrid indexes have something to do with this.

First, the impossible-to-ignore numbers: In second quarter 2014, FIA sales totaled nearly $12.6 billion — 8.5 percent above the industry’s prior record of $11.5 billion in fourth quarter 2013, according to Wink’s new Sales & Market Report. Compared to first quarter, industry FIA sales jumped 15.4 percent, and compared to second quarter one year ago, they shot up 36.5 percent.

Sales leader Allianz Life soared on production of more than $3.8 billion, up 204 percent from second quarter last year and up nearly 37 percent from first quarter this year.

A frequently cited reason for FIA sales records is the product’s ability to deliver upside potential (via linking interest growth to gains in one or more financial indexes) plus downside production (in the form of a floor on loss during market downturns).

However, other factors were at work too. These include “hybrid index” options, expanded distribution channels, slightly higher commissions, and market leader clout.

Hybrid indexes

FIA Carriers Offering Hybrid Index Options

Allianz Life

American Equity Investment Life

Athene Annuity & Life Assurance

Athene Annuity & Life Company

Fidelity & Guaranty Life

Forethought Life

Security Benefit life

Source: Wink’s Sales & Market Report,

2nd Quarter 2014

In second quarter, $3.5 billion of FIA sales involved premium allocation to hybrid index options, Sheryl Moore, president and chief executive officer of both Moore Market Intelligence and Wink, said in an interview.

A hybrid index is essentially an index of several other financial indexes. It is one of several types of indexes that carriers offer for use in calculating potential interest crediting to a policy.

Close to 40 of the 299 FIAs offered by eight carriers now have hybrid index options, Moore said. That’s up from a year or two ago when few such options existed.  At least 10 more carriers want to offer hybrid options in the future, she said.

The growth in dollars allocated to hybrid options has been meteoric. In second quarter, 31 percent of all FIA sales premiums went into hybrid options, according to Wink. By comparison, in the same period last year, hybrid index allocations were so small that Wink did not have a separate category for hybrid indexes. (Instead, Wink assigned the hybrid index allocations that carriers did report to its Barclay’s/Lehman bond index category, which accounted for only 0.5 percent of allocations that quarter.)

It was in first quarter 2014 that the hybrid options started making industry eyelids flicker. Allocations to Barclay’s/Lehman quarter represented 20 percent of all index allocations, most of it from hybrid allocations, Moore said.

The hybrid momentum continued in second quarter, so Wink separated the hybrid and bond index allocations, with the former now representing 31 percent of allocations and the Barclay’s/Lehman, just 0.2 percent.

What’s driving the hybrid craze? The indexes are viewed as low (or managed) volatility options that carriers can offer without caps on participation rates. Since some buyers don’t like caps on growth potential, this index is being positioned as a good fit for such customers.

Some marketers have taken to portraying the hybrid index as an “uncapped strategy.” That marketing message could be a factor propelling sales too. However, Moore and other industry experts repeatedly stress that hybrid options do not represent an uncapped strategy (because carriers use spreads that effectively limit growth potential, even without caps). For that reason, they urge producers not to sell it that way.

Moore likes the approach that American Equity has taken. The carrier recently introduced a new hybrid option for its FIAs that the company calls a “volatility control index.” The marketing collateral states that “this is not an unlimited crediting strategy,” she said. 

Another growth factor involving hybrid options is carrier commitment to advertising and education around hybrid indexes. That is, the greater the commitment, the greater the sales. For instance, Allianz has invested substantial resources into promoting its Barclay’s US Dynamic Balance Index, which is a hybrid option that is exclusively available inside of Allianz FIAs, Moore said. This option attracted $2.7 billion of Allianz’s total FIA second quarter premium, she said.  

No other carrier has as high an allocation to hybrid options, she added. Meanwhile, nine FIAs currently have no allocations to their hybrid index options at all, perhaps because they are new and perhaps because the carriers have not done a lot of education on the options.

Another hybrid-related factor that may be contributing to FIA sales is presence. That is, the presence of such an option in the product. Customers who do not elect the hybrid option at policy issue may like the fact that the option is available so they can elect it later on, if desired. This “someday” strategy is hard to quantify, but it can influence sales all the same.

One countervailing factor that could hold back some sales is that many of the new hybrid options are largely unknown. That can make the sales experience more complex than some producers (and customers) want.

The newness of the options is a concern to state insurance regulators, Moore added, noting that regulators prefer well-known indexes that are easy for consumers to recognize and follow. In addition, regulators are concerned that agents who only hold insurance licenses may slip into offering unregistered investment advice when attempting to explain less-well-known hybrid options to clients.


Expansion of distribution channels is another factor that has impacted sales.

For instance, the growing influence of proprietary FIAs impacted sales too. These FIAs are designed for distribution by one or more select field marketing organizations (FMOs). According to Wink, nearly a third of second-quarter sales went into such products. If agents can get access to better products and/or commissions through such FMOs, they will often seek to place business through those organizations, Moore said.

In addition, distribution channels are expanding. Although independent agents still sell the large majority of FIAs, Wink’s report shows that agent’s market share fell to 80 percent in second quarter, from 87 percent one year ago. Meanwhile, banks shot up to an 11 percent share from nearly 8 percent a year ago, and broker/dealers (wirehouse only) won a 5 percent share compared to not even 2 percent the year before.

The shifts reflect the fact that some carriers are targeting sales in banks and broker/dealers, Moore said. That includes carriers which have entered the market in the past year or so.

For instance, Nationwide grew most of its second quarter sales in banks, wirehouses and captive agencies, and its sales ranking increased to 23 from 35 a year ago on nearly $102.9 million in production. Although this volume is nowhere near that of market leader Allianz, Moore pointed out that  Nationwide has not been in the FIA market for very long, and its numbers soared by nearly 820 percent compared to second quarter last year by focusing on channels where it already has distribution relationships.

Similarly, Protective Life, which re-entered the FIA market last year after a hiatus, grew its FIA sales by nearly 560 percent to nearly $174.9 in second quarter. That growth put Protective in 18th place in Wink rankings, up from 29th one year ago -- on sales in banks and wirehouses, Moore said.


The average commissions paid to the street agent in second quarter moved up slightly, to 6 percent from 5.9 percent in first quarter, according to Wink. Although nominal, the uptick is significant because it’s the second consecutive increase in average commission since the 10-year low of 5.6 percent in fourth quarter 2013.

“The carriers are adding bonus commissions to incent sales,” Moore noted. That’s in lieu of making permanent upward adjustments in the commission scale, which is something they are not yet ready to do. However, it’s a sign that the industry is starting to seek new business.

Sales leader prowess

The top three FIA sellers — Allianz, Security Benefit and American Equity — represented a combined market share of nearly 50 percent in second quarter, Wink reports. That’s up from nearly 38 percent the same year earlier period and a sign that the top FIA brands clobbered the competition.

A lot of that gain in share is due to Allianz, Moore said, noting that the carrier won a 30 percent share in second quarter, up from nearly 14 percent the year before. Still, branding power characterized the overall sales environment.

That includes the power of a new brand with old FIA brand roots. This is Athene USA, which acquired onetime FIA leader Aviva USA last year. Sales sagged during the transition period, but Moore believes Athene is now “over its merger/acquisition hump” and focusing hard on sales. Not incidentally, Athene offers hybrid index options in their FIAs, according to Wink.

Top FIA Sales Leaders - 2Q 2014


Sales, April through June

Allianz Life

$3.8 billion

Security Benefit Life

$1.3 billion

American Equity Companies

$1.0 billion

Source: Wink’s Sales & Market Report 2nd Quarter 2014

Numbers rounded


, MBA, is a contributing editor to AnnuityNews, specializing in life insurance, annuities and income planning. Linda may be reached at [email protected].

© Entire contents copyright 2014 by Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from



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