Annuity Sales Help Allianz Profit Rise 9 Percent in 1Q

Hybrid variable annuities and fixed indexed annuities (FIA) sold in North America helped boost Allianz SE’s operating profit 9.4 percent to 2.9 billion euros in the first quarter compared with the year-ago period, the company reported.

Revenues rose 2.5 percent to 36.2 billion euros in the period compared with the first quarter 2016.

“The Life and Health business segment enjoyed an outstanding start to the year with operating profit rising by more than third, mainly driven by a strong investment margin in the United States,” said Dieter Wemmer, chief financial officer of Allianz SE.

Hybrid variable annuities, sometimes called structured variable annuities, accounted for 18 percent of new business premium in the U.S. in the first quarter, the company said.

Hybrid variable annuities and FIAs helped generate 34 percent of new business premium in the first quarter, a dip from 35 percent in the year-ago period, the company said.

Allianz’s North American life insurance subsidiary, Allianz Life Insurance of North America in Minneapolis, has been the top seller of FIAs in the U.S. for several years.

FIA sales slowed earlier this year due to the uncertainty surrounding the Department of Labor’s fiduciary rule, but picked up again in March, Wemmer said in a conference call with analysts.

The largest share of new business premium within the life and health segment is being generated by capital-efficient products such as hybrid variable annuities and FIAs, and sales of these products rose in Germany, the company said.

Allianz Life Insurance sold $1.45 billion worth of hybrid variable annuities last year, compared with $592 million for traditional variable annuities, the first time structured variable annuities have outsold the company’s regular variable annuities.

Insurers like hybrid variable annuities because they require less capital to support than traditional variable annuities.

Traditional variable annuities come with lifetime income guarantees, which some insurance companies have found difficult to honor with interest rates still historically low.

In the U.S., Allianz owns several insurers. They include Allianz Life Insurance, and asset and investment management companies PIMCO and Allianz Global Investors.

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.