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FDIC Bested By Annuities On Unprotected Account Balances 1/12
In the latest issue of Advantage Compendium my research revealed that 7 fixed annuity carriers have entered state receivership since 2000. With one exception it appears the carriers either reemerged from state control or the annuity contracts were fully assumed by another carrier. The exception was London Pacific Life where although annuityowners were fully protected up to state guaranty funds limits only 80 cents on the dollar was paid on balances over the limits.
Since 2000 annuityowners of 1 failed annuity carrier may have not received 100% of their account value
By contrast, look at the bank world. Since the millennium 446 banks have been taken over by FDIC. When an insurer comes under regulator control it may well reemerge. When a bank is taken over by FDIC you can pick the location for the wake because it is not coming back to life. However, one thing both FDIC and annuity guaranty funds have in common is that they have both always protected consumers up to the limits of their coverage in the event of failure.
Since 2000 customers of over 350 failed banks may have not received 100% of their account value
Where they differ is in their treatment of unprotected account balances. Of the 446 banks that have failed since 2000 over 350 of them have not yet returned 100% of the uninsured account balances. Every customer was protected up to FDIC limits, but if you had unprotected money you ultimately may have wound up getting as little as 66 cents on the dollar when the process ended.
Bank or annuity carrier failures are rare events. As a percentage, less than 5% of all banks have failed since 2000 and an even lower percentage of annuity carriers have entered state control. Since inception all of the annuityowners of failed annuity carriers received their full account value up to the limits of the state guaranty fund and all FDIC insured accounts have likewise been covered. However, it is a different story for uncovered amounts. Going back a quarter century I could only find 5 instances where those fixed annuityowners with account balances above the guaranty fund limits received less than their full account value if they didn’t surrender their contracts. By contrast, uninsured customers of hundreds of failed banks were not treated was as well by FDIC.
Range
Of 2011 1st Year Real World Index Annuity Returns
2/12
This chart shows the range of actual first year index annuity
returns for 12 month periods ending at the end of each month for 2011. The
results include almost every index annuity on the market in 2010. How to read this: Looking at
January, the worst annual pt-to-pt annuity (blue) returned 3%, the best 12.4%
for the year, and all of the other annual pt-to-pt product returns were in
between. Monthly cap (green) returns ranged from 0% to 9.8% depending on the
product. Top averaging (yellow) returns were generally uncapped and Trigger
(red) are stated rates returned if the index does not decline.
4th
Fourth quarter 2011
index annuity sales were $8352 million compared
with sales of $8690 for
the previous quarter –
a 4%
decrease according to the
Beacon Research Fixed Annuity Premium Study. The top ten carriers for the
fourth quarter:
| Allianz Life | $ 1,436,696,200 |
Security Benefit Life | 398,049,500 | |
| Aviva | 1,208,427,000 | Jackson National Life | 388,793,900 | |
| American Equity | 1,154,759,400 | North American Company | 346,707,000 | |
| Great American | 415,798,100 | F & G Life | 315,821,300 | |
| Midland National Life | 401,979,000 |
Lincoln National Life | 294,032,400 |
2011 Sales
Index annuity sales for the year were $32.978 billion.
Winners & Losers
Index
Annuity Complaints Plummet 4/12
By 2007 the index annuity carriers averaged one customer complaint for every
$109 million of premium sold. However, over the last four years index annuity
complaints dropped dramatically. In 2011 there was one index annuity complaint
for every $660 million of premium. Total index annuity closed customer
complaints against carriers offering index annuities in 2011 were 50 contrasted
with 80 the previous year.
2011 complaints were the lowest in 7 years and 6 TIMES LOWER than they were in 2007
Led by Phoenix (PHL) Life and Security Benefit, twenty of the top 30 index carriers had no index annuity coded complaints last year. Other top carriers with zero complaints were EquiTrust, American National, American General, Americo, Lincoln Benefit, CUNA, Reliance Standard, Western National, Liberty, UNIFI and Sagicor. Looking back at the 54 carriers that have written index annuities over the past 7 years – including both currently active and inactive sellers – 37 of all index annuity carriers received zero complaints.
