What’s Behind Allianz’s Huge Lead In FIA Sales?

By Linda Koco
InsuranceNewsNet

Allianz Life made head-spinning gains in its fixed index annuity (FIA) sales in 2014, according to figures recently published by Wink, Inc. Allianz’s sales totaled over $12.7 billion, more than double its $6 billion total in 2013, for a market share of 27 percent.

The results put Allianz in first place among the 52 companies tracked in the Wink’s Sales & Market Report on 2014 FIA sales.

Being in first place is not new to Allianz. It has been the FIA sales leader for 14 of the last 15 years, with the exception being 2008 when it took second place in the Wink rankings.

But its lead in 2014 was gigantic by FIA standards, in percentage as well as dollars. Its 2014 sales were more than more than 200 percent ahead of its closest contenders — Security Benefit Life and American Equity Companies, each of which sold nearly $4.2 billion, with Security Benefit taking second place on a close lead over American Equity.

By comparison, in 2013, Allianz’s $6 billion-plus total gave it a lead of about 33 percent over the second runner-up, Security Benefit, based on figures from Wink. In 2012, Allianz’s $5.4 billion total put it ahead of second-place Aviva (now Athene USA) by roughly 32 percent.

A huge lead

The 2014 lead was so large that the company dominated other industry-wide results for the year, Sheryl J. Moore told InsuranceNewsNet. Moore is president and CEO of both Moore Market Intelligence and Wink Inc., an index product researcher.

At least a quarter (27 percent) of the FIA industry’s record-breaking production of nearly $46.9 billion (21 percent over 2013) was due to Allianz, for example.

Allianz also contributed to the top three carriers winning close to half the industry’s the market share in 2014, Moore indicated. In the fourth quarter, for instance, the top three companies had a collective share of the FIA market equaling nearly 43 percent, with Allianz contributing the largest portion. By comparison, in fourth quarter 2013, the top three’s market share was 39.5 percent.

When Wink looked at FIA sales leaders by distribution channel, Allianz ranked among the top five leaders in three of the four channels that Wink follows. It ranked first in the agency channel, second in the bank channel and second in the wirehouse channel.

When Wink looked at the 10 top selling FIA products per quarter, Allianz was also a major factor, according to Moore. In the fourth and third quarters, four of the top 10 products were Allianz FIAs — the Allianz 222 Annuity, the Allianz 360 Annuity, the Allianz Core Income 7 Annuity and the Allianz 365i Annuity. In second and first quarters, three Allianz FIAs were in the top 10.

The drivers

Moore said she thinks the big driver behind the Allianz results is the company’s preferred platform of field marketing organizations (FMOs). Three of the company’s top selling FIAs — the 222, 360 and 355i — are sold through that distribution platform, she said. 

The products have some simplifying features that make it easier for advisors to tell the FIA story than that of some other FIAs on the market today, she noted, adding that “simplicity matters.”

With so much variety in the FIA marketplace, she explained, it’s hard for producers to do apples-to-apples comparisons. In addition, some producers find the complexities of some FIA features difficult to understand. Because of that, having access to a policy that is easier to present and explain makes a difference in sales, Moore said.

The platform contributes to Allianz’s sales growth in another way too. According to Moore, agents who sell through the platform can get a supplemental commission based on total Allianz FIA production, which includes Allianz’ general distribution FIAs, not just the three platform FIAs.

In view of the declining FIA commissions in the past few years, that is a “sweet deal for the agents,” she said.

According to the Wink sales report, the average agent commission on FIA sales ticked up in the fourth quarter to 6.1 percent of premium, from 6 percent in third quarter and from 5.6 percent in fourth quarter one year ago. But average commissions are still not close to the industry’s 10-year high of 8.4 percent in third quarter 2005. Also, the commission increases that did occur in fourth quarter were due to commission bonus programs of only a few carriers, not to increases by all FIA carriers, Moore said.

The company’s strong ratings have helped Allianz FIA sales too, she said. So has its multiple channel distribution structure, which includes distribution through the emerging FIA channels of banks, wirehouses and broker/dealers. Allianz has the ratings the emerging channels look for, she noted, adding that emerging channels generally will not do business with FIA companies unless they have an A rating from A.M Best, which Allianz has.

 “Putting it all together, it’s not hard to see why Allianz had that big percentage increase in sales,” Moore said.

Other FIA trends

Other FIA trends in Wink’s year-end report include the following:

• Sales through wirehouses are increasing. They represented 5.3 percent of fourth quarter sales, up from 2.6 percent in the same year-earlier period. However, eight of every 10 FIAs sold continue to be sold by independent agents.
• Allocations to hybrid indices were nearly 28 percent in fourth quarter 2014. That’s level with the previous quarter. Now offered by 15 FIA carriers, hybrids are derived from one or more other indices. Moore said the options are popular today because most are uncapped, offering unlimited potential for gain, though subject to fees or other limits.
• The average FIA premium has inched up while average traditional deferred annuity premiums have declined. In fourth quarter, the FIA average was roughly $84,800, level with the previous quarter and up from $83,500 in fourth quarter 2013. Meanwhile, the average for traditional fixed annuities was $61,000 in fourth quarter, down 10 percent from the previous quarter and down by nearly 22 percent from fourth quarter 2013’s average of $78,000.

InsuranceNewsNet Editor-at-Large Linda Koco, MBA, specializes in life insurance, annuities and income planning. Linda can be reached at [email protected].

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Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda can be reached at [email protected].