American Equity Committed to Independent Channel, Despite BIC

Despite a drop in fixed indexed annuity sales last year, the president of American Equity Investment Life Insurance Co. said Friday the company has no intention of steering sales away from the independent agent channel.

FIA sales at the company fell 16 percent to $5.7 billion in 2016 compared to 2015 but the drop had more to do with competition from Security Benefit Life coming back into the income guarantee market and a newly competitive Athene USA, executives said.

Overall, the indexed annuity market cooled significantly at the end of last year as fourth quarter sales fizzled 13 percent to $14 billion compared with the year-ago period, according to industry tracker LIMRA Secure Retirement Institute.

American Equity’s FIA sales slowdown has “nothing to do with us pulling back from the independent channel,” said Ron Grensteiner, president American Equity in an interview. “We’ve never indicated we were going to pull back.”

While sales slowed both within the overall FIA market and at American Equity, “It was not our intention for us to slow down in the independent channel,” he said.

In 2015, American Equity was a big beneficiary when competitor Security Benefit in Topeka, Kan., removed its lifetime income guarantee products, executives said.

American Equity, based in West Des Moines, Iowa, will hold a conference call to discuss first quarter earnings May 4, which may yield new information about its latest annuity sales strategies.

American Equity: We Will Not Sign the BIC

Independent agents and the independent marketing organizations (IMO) that recruit them represent the lifeblood of FIA sales, as IMOs are responsible for about 60 percent of all FIA sales.

But the Department of Labor’s fiduciary rule has required that FIAs be sold under a “best interest” contract threshold.

Such a threshold would require a financial institution to certify the sale by agents but IMOs are not considered financial institutions, although the DOL is considering how best to offer IMO’s a pathway to becoming such institutions.

American Equity CEO John Matovina last year said American Equity would not sign any best interest contract because the liability to the insurer was too great.

“Signing the best interest contract in the IMO channel adds substantial risk. Agents in that channel are independent and can sell for multiple insurance companies,” Grensteiner said.
“But that does not mean we’re not going to pay any attention to the independent channel,” he said.

Banks and broker/dealers, however, represent a “key initiative” for American Equity, as these channels represent “a significant growth opportunity” for FIA sales, said Matovina in a news release issued last year.

The DOL consider banks and broker/dealers financial institutions and American Equity’s Eagle Life Insurance Co. subsidiary provides annuities to broker/dealers and banks.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at cyril.tuohy@innfeedback.com.

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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 cyril.tuohy@innfeedback.com.