Athene USA, a major seller of fixed annuities in the U.S., will seek to expand retail annuity distribution through banks and broker-dealers, CEO Grant Kvalheim said Friday.
The company, based in West Des Moines, Iowa, is a subsidiary of Athene Holding, which raised $1.1 billion in an initial public offering. Athene Holding shares began trading on the New York Stock Exchange Friday morning.
Athene USA was the No. 2 seller of indexed annuities in the U.S. in the third quarter with $1.6 billion in sales, an increase of 184 percent over the year-ago period, according to Wink’s Market & Sales report, which tracks the industry.
The company sells FIAs through independent marketing organizations, or IMOs, and has relationships with as many as 30,000 independent agents through those IMOs.
IMO distribution relationships will continue, but the company is looking to grow through other channels as well, Kvalheim said.
“We want to grow in banks and broker-dealers because they are doing more and more of this business,” he added.
As variable annuity sales plummet, banks and broker-dealers are warming to fixed indexed annuities (FIA). FIA sales rose 22 percent to $47 billion in the first three quarters of 2016 compared with the year-ago period, according to LIMRA Secure Retirement Institute in Windsor, Conn.
Athene USA derives the bulk of its sales from FIAs and multiyear guaranteed annuities, or MYGAs, and the company generated $3.8 billion in new premium this year, Kvalheim said.
Holding off on Fee-Based FIAs
Kvalheim, who joined the company in 2011, said there is a “reasonable chance” that implementation of the Department of Labor’s fiduciary rule will be delayed with the incoming administration of president-elect Donald Trump.
Trump earlier this week nominated Andrew Pudzer, chief executive of CKE Restaurants and a critic of tighter regulation, as his labor secretary.
Implementation of the fiduciary rule is set to begin in April. Many in the industry are talking about fee-based products, but fee-based annuities don’t appear to be part of Athene USA’s product development plans.
“There has been a lot of talk of fee-based products in connection with the DOL Rule but we have not seen demand for it,” Kvalheim said.
Earlier this year, the company launched Ascent Pro, a fixed indexed annuity with a lifetime withdrawal benefit rider.
The company also added a new alternative index to its Performance Elite fixed indexed annuity, and updated its Balanced Choice fixed indexed annuity, which the company developed exclusively with Annexus, an Arizona-based annuity product developer.
In the third quarter, Athene had three of the top 10 selling indexed annuity products.
The performance of fixed annuity companies is most affected by interest rates and if rates rise “it’s not a good thing, it’s a great thing,” Kvalheim said.
Twenty-nine percent of the company’s assets are invested in floating rate assets and for every quarter-point increase in the interest rate, he explained, the company generates $25 million more in net income as fixed annuities become more attractive.
“We sell fixed-rate savings products and if rates go up that expands the appeal,” he said. “Rising rates are fantastic.”
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected]