Allianz reported that third quarter sales of buffered variable annuities rose 62 percent over the year-ago period in the U.S. This is a sign that advisors have warmed to a small but growing product line within the struggling variable annuity market.
Fee income from asset flows into Pacific Investment Management Co. also boomed in the third quarter, Allianz reported.
Customers and shareholders were benefiting from new products developed by Allianz Life in response to a very low interest rate environment, said CFO Dieter Wemmer in a conference call with analysts.
Buffered variable annuities stick with index allocations, few subaccounts, no living benefits and no lifetime income riders. They commit investors to shorter terms and expose policyholders to losses beyond a protection buffer offered by the insurer.
Buffered variable annuities, sometimes known as structured variable annuities protect, or buffer, contract holders from market downturns to a limited extent.
From the perspective of the insurer, buffered variable annuities are considered “capital-efficient” as they require less capital to support than traditional life and annuity products. Even if sales dip, as they did in the U.S. in the second quarter, the company can still generate higher profits.
Buffered variable annuities are typically sold by broker/dealers while indexed annuities, another capital efficient insurance product, are sold by independent agents.
Asked by an analyst if buffered annuities were “taking over” from the company’s indexed annuities, Giulio Terzariol said there was no cannibalization between the two channels. Terzariol will become Allianz's new CFO in January.
Allianz doesn’t break out specific third quarter numbers for buffered variable annuity sales.
At the end of the second quarter, buffered variable annuity sales were $1.8 billion, or about 7 percent of the entire variable annuity market.
New business premium in the company’s U.S. life and health segment fell 13.3 percent to about $2.8 billion, Allianz reported.
The delay in the Department of Labor’s fiduciary rule until July 1, 2019, which had weighed down Allianz Life in the first half of this year, is no longer having a “major impact on what we are doing,” said Terzariol.
Allianz posted a 17 percent drop in third quarter net income to $1.9 billion, with hurricane and fire-related losses in the company’s property/casualty segment costing the company more than $590 million, Reuters reported.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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