Society of Actuaries Society of Actuaries annual meeting annual meeting 111 Panel Discussion 111 Panel Discussion Indexed Product Deep Dive (Life and Indexed Product Deep Dive (Life and Annuity) Annuity) Timothy C. Pfeifer, FSA, Timothy C. Pfeifer, FSA, MAAA MAAA Pfeifer Advisory LLC Pfeifer Advisory LLC October 13, 2015 October 13, 2015
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Society of Actuaries annual meeting 111 Panel Discussion Indexed Product Deep Dive (Life and Annuity) Timothy C. Pfeifer, FSA, MAAA Pfeifer Advisory LLC.
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Society of Actuaries Society of Actuaries annual meetingannual meeting
111 Panel Discussion 111 Panel Discussion Indexed Product Deep Dive (Life and Annuity)Indexed Product Deep Dive (Life and Annuity)
Timothy C. Pfeifer, FSA, MAAATimothy C. Pfeifer, FSA, MAAA
Pfeifer Advisory LLCPfeifer Advisory LLC October 13, 2015October 13, 2015
Fixed Indexed Annuity Sales Have Fixed Indexed Annuity Sales Have Performed Impressively, Despite a Performed Impressively, Despite a
Difficult EnvironmentDifficult Environment
Average size of FIA sale popped in mid-2013, now nearly $90,000Average size of FIA sale popped in mid-2013, now nearly $90,000
10-year SC 10-year SC and 7-year and 7-year
SC SC Domination– Domination– two thirds of two thirds of
sales pay sales pay bonusesbonuses
S&P 500 S&P 500 Accounts for Accounts for 55% of sales, 55% of sales,
Hybrid Hybrid Indexes Indexes
account for account for 28%28%
Banks and Banks and Broker/DealeBroker/Dealers sold 25% rs sold 25%
of FIAs, of FIAs, Independent Independent Agents 70%Agents 70%
Q2 YTD Q2 YTD Sales $23.6 Sales $23.6 billion, up billion, up about 1% about 1% over 2014over 2014
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FIA Sales Show Substantial Dispersion FIA Sales Show Substantial Dispersion in Terms of Meaningful Carriers, but in Terms of Meaningful Carriers, but
Overall Production is Dominated by 6–8 Overall Production is Dominated by 6–8 Life InsurersLife Insurers
Top Six PlayersTop Six Players
At least 27 carriers are on track At least 27 carriers are on track to sell $250 million or more of to sell $250 million or more of
FIA in 2015FIA in 2015
At least 36 carriers are on track At least 36 carriers are on track to sell $50 million or more of to sell $50 million or more of
FIA in 2015FIA in 20151. Allianz Life
2. American Equity
3. Great American
4. Athene USA
5. Security Benefit Life
6. American General Life
Notable by their absenceLarge Mutual Life InsurersMost of the largest Variable Annuity Insurers
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Majority of major players offer one or more investment firm-created or index sponsor-created VC indexes with a spread (uncapped)
Carriers targeting niches and sophisticated treatment of Benefit Bases
More 7-8 year products under development, usually without Premium Bonuses, but generous crediting bonuses on 10+ year Surrender Charge products
Product Design is Unrelenting on Product Design is Unrelenting on FIAs, but Several Major Themes FIAs, but Several Major Themes
Continue to DominateContinue to Dominate
Bonus and Bonus and Surrender ChargesSurrender Charges
Much higher caps, par rates on Benefit BaseMuch higher caps, par rates on Benefit BaseDe-emphasize AccumulationDe-emphasize AccumulationGender DistinctionsGender Distinctions
New Reserve Table Impact on GLWBsNew Reserve Table Impact on GLWBs
Nonforfeiture Compliance with GLWB ChargesNonforfeiture Compliance with GLWB Charges
Illustration PracticesIllustration Practices
Despite all of these, I remain very bullish on Despite all of these, I remain very bullish on Indexed AnnuitiesIndexed Annuities
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Indexed Life Sales Have Been Indexed Life Sales Have Been Outstanding over the Past Five Outstanding over the Past Five
Years, and Momentum ContinuesYears, and Momentum Continues
Average size Death Benefit for IUL is now $479,000, slightly risingAverage size Death Benefit for IUL is now $479,000, slightly rising
10-year SC 10-year SC and 15-year and 15-year SC periods SC periods dominate – dominate –
nothing nothing beyond 15 beyond 15
yearsyears
S&P 500 S&P 500 Accounts for Accounts for 60% of sales, 60% of sales,
Hybrid Hybrid Indexes only Indexes only
3.5% 3.5% (Rainbows 25%)(Rainbows 25%)
Independent Independent Agents Agents
accounted for accounted for 73% of sales, 73% of sales,
Career Career Agents 16%Agents 16%
Q2 YTD Q2 YTD Sales $838 Sales $838 million, up million, up about 20% about 20% over 2014over 2014
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* Dump-ins not reflected.* Dump-ins not reflected.A very different Sales Ranking would result A very different Sales Ranking would result
if Dump-ins were included.if Dump-ins were included.
Indexed UL Sales Show a Considerably Indexed UL Sales Show a Considerably Broader Dispersion of Sales by Carrier, Broader Dispersion of Sales by Carrier,
and a Regular and a Regular Re-positioning of Industry LeadersRe-positioning of Industry Leaders
Top Six PlayersTop Six Players
At least 8 carriers are on track At least 8 carriers are on track to sell $75 million* or more of to sell $75 million* or more of
IUL premium in 2015IUL premium in 2015
At least 12 carriers are on track At least 12 carriers are on track to sell $50 million* or more of to sell $50 million* or more of
IUL premium in 2015IUL premium in 20151. Transamerica
2. Pacific Life
3. National Life/LSW
4. Minnesota Life
5. Nationwide
6. AXA US
Notable by their absenceLarge Mutual Life InsurersNotable by their presenceMost of the Variable UL Insurers
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In Volatility Controlled Indices, Lifetime Income Riders.
On Death Benefit Guarantees
The Recent Product Design Trends in The Recent Product Design Trends in the IUL Space Have Been Largely the IUL Space Have Been Largely
Related to the Related to the New Illustration GuidelineNew Illustration Guideline
Persistency Bonuses – Credited Rate enhancements, refund of charges
Accounts with Non-zero Guarantees – Creates need for Hypothetical Benchmark