Crashing The FIA Party: Not Just The Top Companies Driving Growth

By Cyril Tuohy InsuranceNewsNet

To get a sense of just how robust sales of fixed indexed annuities (FIAs) have become, it’s worth taking a closer look at the league tables: Most life and annuity carriers in the market posted higher FIA sales last year than they did in 2014.

Some increases were truly eye-popping. Integrity Life, a member of Western & Southern Financial Group, posted 2015 FIA sales of $610 million, an increase of 1,080 percent over the previous year, according to Wink’s Sales & Market Report.

Nationwide “came out of nowhere” to finish the 2015 FIA league tables in the No. 6 position with $2.4 billion in sales. The company saw its FIA sales rise by 460 percent last year over 2014, Wink reports.

Nationwide’s New Heights 12 and New Heights 9 FIAs leaped into the top 10 FIA products sold last year, pushing Security Benefit’s Secure Income Annuity and Total Value Annuity off the top 10 list.

Other 2015 notables include Forethought Life. The company sold $1.5 billion worth of FIAs last year, for an increase of 225 percent over 2014.

Sentinel Security Life, which sold 100 million worth of FIAs in 2015, saw its sales rise 109 percent over 2014.

AIG, helped by its unique ability to sell through multiple channels, turned in big FIA numbers too. It sold $3.3 billion worth of FIAs last year, an increase of 162 percent compared with 2014, Wink’s data reveal.

While field marketing organizations (FMOs) have been the primary distributors of indexed annuities in the past, there are now companies getting into the market which do not use FMOs, but instead focus on banks and broker/dealers. That’s the word from Sheryl J. Moore, president and CEO of Moore Market Intelligence and Wink Inc., publisher of Wink’s Sales & Market Report.

Variable annuity-centric sellers such as Pacific Life, Lincoln National and Nationwide are starting to inch their way into the FIA market. A main reason for this is that FIAs aren’t likely to be included in the Department of Labor’s restrictive Best Interest Contract Exemption required to sell variable annuities.

Pacific Life saw FIA sales rise 65 percent to $1.36 billion last year. Lincoln National Life saw FIA sales pop 38 percent to $1.34 billion, Wink’s data indicate.

Market leader Allianz Life was the top FIA seller by far with $12.7 billion in sales in 2014 and a 27.1 percent market share. But the company saw its lead cut to $8.7 billion in FIA sales and a market share of 16.4 percent in 2015, as American Equity, Great American Insurance and AIG gained on Allianz.

“The growth was driven by many companies, rather than just the top players as we have seen in the past,” Todd Giesing, assistant research director of LIMRA Secure Retirement Research, said in a news release.

Combined fourth quarter market share of the top three FIA sellers in 2015 was 36.2 percent, a drop from 42.6 percent in 2014, Wink’s also noted.

FIA sales topped $53 billion last year, a 13.1 percent jump over 2014, Wink’s reported.

FIA sales last year also grew at nearly double the rate of their fixed annuity cousins. FIAs are hot — no question about it.

So hot, in fact, that panelists at this week’s Insured Retirement Institute’s Marketing Summit in West Palm Beach, Fla., even wondered whether there will be enough FIA manufacturers to meet the projected demand.

Banks, IBD Channels Report Robust Growth

Behind the insurance brands and the jockeying for bragging rights atop the league tables, developments in how FIAs are distributed and broader acceptance of FIAs help explain why some sellers have leaped to the top of the heap.

Recent growth has come from banks and independent broker/dealer (IBD) channels, according to Giesing. Carriers with strong bank channel distribution relationships – such as Symetra Financial - have done particularly well in 2015. Symetra, which sold $2.3 billion in FIAs las year, saw sales rise by 51 percent over 2014, Wink’s data show.

As recently as 2012, banks sold about $3 billion worth of FIAs. Last year, banks sold almost $9 billion worth of FIAs, Giesing said told InsuranceNewsNet.

FIA distribution through IBDs followed a similar pattern, from just over $1 billion in 2012 to nearly $7 billion in 2015, he added.

In the fourth quarter, the bank channel was responsible for 16.7 percent of FIA sales, an increase of 6.5 percentage points from the year-ago period, Wink’s data indicate.

Carriers that sell FIAs through banks are doing well now because low interest rates have made bank products so unattractive. Why would a depositor roll over a $50,000 certificate of deposit earning 1 percent when an FIA might yield 4 or 5 percent?

“That's a much better deal for most people that you could get with a bank product,” Moore told InsuranceNewsNet.

Bank customers tend to be conservative, invest in cash and prefer liquidity. As a result, FIAs sold through banks tend to be “plain vanilla” products with shorter surrender periods, fewer crediting methods and no guaranteed lifetime withdrawal benefits.

IBDs have seen FIA growth for some of the opposite reasons that banks have. IBD-sold FIAs come with guaranteed income benefits as well as other riders and product features that advisors find useful for income and retirement planning, Giesing said.

IBDs sold 13.5 percent of all FIAs in the fourth quarter 2015, Wink’s data show. Allianz Life, Voya Financial and Nationwide are the top three FIA sellers through the IBD channel.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].