American Financial: DOL Rule Will Have Greatest Impact On Nonregistered Reps

The Department of Labor’s new rule raising investment advice standards into retirement accounts will have the greatest impact on nonregistered retail representatives. That's the word from a top executive with American Financial Group.

But sales by nonregistered reps through the retail channel represented only about 10 percent of American Financial's annuity sales in the second quarter. So the overall effect of the rule isn’t expected to have much impact on the company’s long-term operations, said S. Craig Lindner, co-CEO and co-president.

Second-quarter annuity premiums rose 22 percent to $1.1 billion, an increase of 22 percent compared to the year-ago period, the company reported.

“Based on our analysis of the rule and discussions with our distribution partners, we’re planning for certain changes to our business model, including new products and compensation arrangements,” Lindner said in a conference call with analysts.

“We believe these changes should allow most of our current distribution partners to continue to sell our traditional fixed and fixed indexed annuities,” he said.

American Financial's sales of variable annuities, which are also affected by the rule, are minimal. In addition, the bulk of the company’s variable annuity products are sold into the 403(b) retirement plan market, which is excluded from the Department of Labor regulation, Lindner said.

American Financial derives much of its revenue and profits from specialty property/casualty insurance.

But through the life and annuity operations of its Great American Insurance Group subsidiary, American Financial was the No. 3 seller of fixed indexed annuities last year with sales of $3.7 billion, according to Wink’s Market & Sales Report.

American Financial also sells annuities through banks, broker/dealers, registered investment advisors and field marketing organizations. On Tuesday, the company reported second-quarter earnings of $54 million on revenue of $1.54 billion.

The company reported a profit of 62 cents per share. Earnings, adjusted for nonrecurring costs, came to $1.28 per share, which surpassed Wall Street expectations.

The average estimate of three analysts surveyed by Zacks Investment Research was for earnings of $1.26 per share.

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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