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Athene USA Expected to Gain Footing in Expanding FIA Market

Athene USA tried to hold its ground in first quarter 2014 fixed index annuity (FIA) sales. It sold more than $571.8 million, qualifying it to be one of the quarter’s top five sales leaders, according to Wink Inc. However, the carrier registered a sales decline from the previous quarter and also from first quarter last year.

This happened in the same quarter during which sales leader Allianz Life thundered in at nearly $2.8 billion, registering a stunning 142 percent gain over the first quarter of last year, according to Wink figures.


Despite Allianz’s spectacular gains, Athene’s numbers are the ones that annuity professionals want to know about right now. That’s because Athene swallowed fixed index annuity mega-player Aviva USA in October; the sales losses it suffered during its highly publicized merger and acquisition rumpus became a heads-up for future inquiry.


The Scorecard

Considering its own target, Athene looks to be on its way to achieving its projected $2 billion to $3 billion in total annuity sales for all of 2014. If Athene’s FIA sales merely replicate first quarter results in the following three quarters, the carrier will have sold roughly $2.3 billion in indexed products by year-end. Becuase the company also sells some single-premium immediate annuities and multi-year guarantee annuities, the annuity total will be slightly higher.

Relative to industrywide sales, the carrier came in fifth place on Wink’s list of first quarter fixed index annuity sales leaders. That’s the same position it held at year-end 2013.

On Wink’s list of top companies in the independent agency channel, Athene took fourth place in the first quarter, better than in the fourth quarter 2013, when the carrier did not make that list at all.

Overall, Athene sales were down 15 percent from the previous quarter and down 13 percent from the first quarter of last year, according to Wink. By comparison, the overall industry experienced a 5.8 percent decline in sales compared to fourth quarter – but a nearly 39 percent increase over first quarter last year.

It’s likely that Athene will pick up steam as the year wears on, Sheryl Moore said in an interview. The president and chief executive officer of Moore Market Intelligence and Wink, Moore has been watching the carrier for signs of potential hiccups as it begins its new life.

“It can take a couple of quarters for a company to get its bearings following an acquisition,” Moore said. But once things are running smoothly, she expects Athene’s sales to start growing, probably in the second quarter, she said.


Competition Is Growing

If the company does increase its sales this year, as Moore predicted, it will happen in the face of increasing competition. Carriers are making enhancements to their products to stimulate sales, she said.

For instance, the average commission paid to the sales agent has gone up – to 5.9 percent in the first quarter from 5.6 percent in the fourth quarter, according to Wink’s Sales & Market report for the first quarter. The report also shows that sales involving products paying 7 percent to 8.99 percent in commission have accounted for an increasing share of sales over the last four quarters, reaching approximately a 55 percent share in the first quarter.

“It’s a sign that carriers are slowly getting their products back to the way they were before the market collapse in 2008 when commissions were in the 8 percent range,” Moore said.

To achieve these increases, several carriers have introduced “commission bonus programs.” The most common increase to agents who qualify is 0.5 percent, but this rate varies. The carriers are introducing this cautiously, Moore said, “so they won’t have to claw back the increases if market conditions should decline later in the year.”

Even so, the fact that the average is up – at all – is a sign of increased competition.

In addition, carriers are increasing the cap rates, participation rates and fixed account rates in their products, according to Moore. This is a reflection of the modest improvements seen in 10-year Treasury rates, she said, and distributors are responding to the changes by advertising they now have “uncapped annuities.”

Another increase has occurred in the premium bonus percentage that many carriers pay to policyholders. The carriers have started increasing this percentage, and that stimulates sales, Moore said. (The premium bonus range in the first quarter was 0.5 percent to 12 percent.)

Not all companies offer bonus products. In fact, in the first quarter, the percentage of FIA sales with bonuses actually declined, to 66 percent from 75 percent in the fourth quarter, according to Wink. But those that offer the products are carriers in the independent agent channel, where bonus annuities sell very well and competition is keen.

Another trend in the competitive environment is the rising sales of fixed index annuities through banks and wirehouses. Banks increased their share of sales to 13.5 percent in the first quarter, almost twice the 7.6 percent share they held in first quarter 2013, according to Wink. Meanwhile, wirehouses more than tripled their share, to 4.3 percent from 1.3 percent in the same quarter a year ago.

Products sold in these channels tend to pay lower commissions and have shorter surrender charge schedules than products sold in the independent channel. They also tend to be issued by carriers rated A- or higher that do not feature premium bonuses, Moore said, noting that some carriers definitely want to be players in this market.

The Long View

Overall, Moore takes the long view in assessing the first quarter decline in industrywide sales.  First quarter sales are normally “abysmal,” she said in a statement. That’s because fourth-quarter sales tend to be high as agents rush to complete sales before year-end. “However, when you consider that this was second-greatest quarter ever for indexed annuity sales, it was a pretty good quarter!”

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

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