Buffered Annuities Boost Allianz Sales In 1Q

By Cyril Tuohy

Sales of life and annuity products in the U.S. rose 4 percent in the first quarter to $2.5 billion compared to the year-ago period, Allianz SE reported.

Buffered variable annuities were largely responsible for the sales growth, the company said.

Buffered VAs are structured to protect, or buffer, buyers against most market losses – but not the huge losses – in exchange for a higher cap on credited interest.

Overall sales of buffered VAs are on a hot streak, soaring 25 percent to $9.2 billion in 2017 compared to 2016. They outpaced the overall VA market, which shrank by 9 percent last year.

Other life and annuity insurers have been reporting strong quarterly sales this earnings season and sales tallies for the overall annuity market are expected next week.

Tax reform, better economic growth, solid manufacturing activity and a weak U.S. dollar contributed to a strong earnings season, one market analyst said.

Allianz, a global multiline insurer and investment manager based in Munich, sells life insurance and annuities in the U.S. through Minneapolis-based subsidiary Allianz Life.

Moving Toward a More Efficient Mix

Buffered VAs represent a fast if not the fastest-growing subsegment of the $96-billion VA market. Insurers like buffered VAs because they are considered “capital efficient,” and less expensive than traditional VAs.

When interest rates are low, as they are now, traditional VAs are more expensive for insurers who must honor financial guarantees.

Over the past several quarters Allianz has shifted its product mix to favor capital efficient products in countries where it operates.

In the first quarter, 38 percent of new premium in Allianz’s life and health segment was generated by capital-efficient products, compared with 34 percent in the year-ago period, Allianz said.

Overall first quarter profit at Allianz SE rose 6.8 percent to $2.3 billion over the year-ago period due to investment results, lower restructuring charges and a lower tax rate, the company said.

“Allianz enjoyed a good start into 2018,” CEO Oliver Bate said in a conference call.

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

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 [email protected].