Allianz Life Widens FIA Lead Over American Equity

By Cyril TuohyInsuranceNewsNet

Editor's note: American Equity Investment Life Insurance Co. responds, reaffirming commitment to the independent channel.

Allianz Life, the nation's No. 1 seller of fixed indexed annuities, saw its FIA sales more than double over its next closest competitor last year.

Allianz's success is due to its strong distribution relationships with broker/dealers, wirehouses and insurance marketing organizations (IMOs), said Matthew Gray, senior vice president of product innovation.

But the widening rift between Allianz and the rest of the FIA pack is also due to last year's decision by the No. 2 FIA seller - American Equity Investment Life - to dial back on FIA sales through the independent agent channel.

Last spring, American Equity executives said that the company’s liability risk associated with distributing FIAs through IMOs and independent agents was too high.

Instead, the company said it would focus on selling FIAs through banks and broker/dealers while sprucing up fixed annuities.

IMOs are responsible for between 50 percent and 60 percent of FIA sales.

Regulators, however, have proposed that only the largest IMOs be considered financial institutions on a par with insurers, bankers, broker/dealers, wirehouses and registered investment advisors for the purposes of FIA sales.

Allianz Life finished 2016 with indexed annuity sales of $10.1 billion, an increase of 17 percent over 2015, LIMRA Secure Retirement Institute data show. In the FIA market, Allianz last year outsold American Equity by $4.4 billion last year. In 2015, Allianz outsold American Equity by $1.9 billion.

American Equity finished 2016 with FIA sales of $5.7 billion, a drop of 16 percent over 2015.

Two FIA Journeys in DOL Universe

The widening sales split between the No. 1 and the No. 2 FIA sellers offers the market a cautionary tale of how two companies have reacted differently to regulatory changes affecting one of the hottest-selling segments of the annuity marketplace.

American Equity appears to be retrenching with regard to FIA sales through the independent channel because of the potential liability risk in the future.

Instead, the company has chosen to broaden its fixed annuity portfolio with the March introduction of the RateShield fixed annuity series.

By contrast, Allianz appears to be forging ahead with new FIAs and features distributed through multiple channels.

A PIMCO volatility control index was recently added to the company’s top-selling Allianz 222 FIA, Gray said.

In February Allianz announced the launch of the first fee-based FIA, the Retirement Foundation ADV Annuity.

So far as product enhancements are concerned, “We plan to continue along those lines,” Gray said.

Allianz has six wholly-owned IMOs or field marketing organizations (FMOs) and those IMOs generate about one-third of indexed annuity sales, Gray said. The remainder of FIA sales come from other channels.

With the Department of Labor fiduciary rule slated for implementation on June 9, distribution channel changes are widely expected.

Along with the changes to the IMO channel, investment advisors have shown more openness to annuities and the income guarantees they offer as an offset to low interest rates and volatility of equity markets, Gray said.

Some investment reps have stopped selling commission-based annuities and have asked Allianz to develop fee-based versions of the products to incorporate into their advisory practices, he said.

“We’re still scratching the surface,” he said.

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