American Equity Guaranteed Income, is It Safe?

[nathan.lee]

Jacobtn, to be fair, I do not see where he mentioned rolling it into a security or variable. The subject of his thread wanted to know if it was a safe contract. My concern would be liquidity of the contract . That agent put a 45yr old at the time into a 16 yr contract. We don't know her networth and we don't know her cash available issues. Hard to say either way whether it was a good move to begin with.
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The thread was edited, origionally stated it was a variable.

Ah...I see. My mistake then.

 

[sjbutton]

Thank you Jason. I'd like to go offline to learn more about your thinking.
Thank you Scagnt83...this was the very answer I was searching for. I was hoping this forum would include the rare agent who really knows how to evaluate insurance companies, and keeps track. I must ask, however, are you an AE "insider?"
Did anyone see the 11/3/12 SWJ article about Hartford Financial Services execs " seeking regulatory approval to make offers to a slice of its annuity oweners to swap the income guarantees for boosts to the amounts that they have invested in underlying stock and bond funds."? This, and companies stopping sales of these contracts are what concern me, along with BBB+ ratings. I'd have a hard time convincing a client to buy a 50+year corporate bond from a company that had such a rating.
Thank you all, I am loving this conversation,
Sally Jo (not a sir, and not an agent and not AUM....only retainer....I've done all possible to remove conflict of interest).

 

[scagnt83]

Thank you Scagnt83...this was the very answer I was searching for. I was hoping this forum would include the rare agent who really knows how to evaluate insurance companies, and keeps track. I must ask, however, are you an AE "insider?"
Did anyone see the 11/3/12 SWJ article about Hartford Financial Services execs " seeking regulatory approval to make offers to a slice of its annuity oweners to swap the income guarantees for boosts to the amounts that they have invested in underlying stock and bond funds."? This, and companies stopping sales of these contracts are what concern me, along with BBB+ ratings. I'd have a hard time convincing a client to buy a 50+year corporate bond from a company that had such a rating.
Thank you all, I am loving this conversation,
Sally Jo (not a sir, and not an agent and not AUM....only retainer....I've done all possible to remove conflict of interest).

Lol. No. Certainly not an AE insider. I am an Independent agent who works with Retirees/Pre-Retirees & Business Owners.

Insurance Companies/associations/affiliated businesses publish comparisons such as asset/liability ratios. It isnt the end all be all comparison. But its helpful. I dont have it at the moment, but they were in the top 15% or so.


As for Hartford wanting to boost the equity position on Guaranteed Lifetime Income Rider Contracts; why do you think that was? Because the Riders represented a substantial amount.

But has Hartford defaulted on any obligations? No.
However, they did reduce their future contractual obligations.

So basically Hartford was able to transfer the risk of fulfilling their contractual obligations from themselves to the clients (via the market). Not a bad business decision. Helps their shareprice and their ratings.
But it has no real bearing on the contractual risk to the policy holder.


Companies have been stopping sales of certain contracts or reducing contract rates are totally due to the interest rate environment.
But contractual guarantees have underlying investments based on Gov & AAA Corp bonds based on the time horizon of the contract.
So just because a company cant continue to offer a guarantee as attractive as that contract, does not mean they can not afford to cover the guarantees in existing contracts.


The difference between Corporate Bonds at a BBB+ and an Insurance Company at BBB+ are the regulatory differences.

An insurance company must invest a certain percentage of deposits into Treasuries & Investment Grade Bonds (mostly goes to treasuries) per DOI regulations.
They must invest enough into them to cover Contractual Guarantees.

Obviously a Corporation does not have to invest a certain % of assets or revenue into Treasuries.

This is the main difference.

Im not saying that AEs ratings are great, it is certainly their weak spot.
But they also are not as big as a lot of the higher rated companies.

When you consider the underlying guarantees (Treasuries & a little bit of AAAs) backing the Contractual Guarantees of the Annuity Contract. And then combine that with the Safety Net that the SGAs give of helping to not go insolvent.
An Annuity from a BBB+ is much more secure than a Corp Bond at BBB+.

As of 2009; since 1983 only 75 "Multi-State" Life/Health Insurers have become fully Insolvent (this is different and worse than receivership).

The vast majority of troubled insurers have their books of business bought up by well off Insurers.
Im not saying thats what you want to happen to your Company, but Insurance Companies/Contracts have multiple layers of safety nets that Corporate Bonds do not have.

Here is a small explanation of how Guarantee Funds work.

 

[indexedannuity_girl]

I am very surprised to see this post. After releasing our most recent sales results, more than 21% of all indexed annuity sales occur through underwriters that have less than an "A-" rating. Most of the insurance industry was adversely affected by the nation's collapse in 2008; ratings declined for a large majority of the industry. The vast majority of these have yet to recover from the downgrade.

One must consider that despite American Equity having an "A-" rating, they have been selling indexed annuities longer than nearly every company offering these products.

My advice would be to look at the client's annuity, circumstances, and goals; then look at the company's financials (not just their rating). A 16-year surrender charge would make most registered reps feel uncomfortable, simply because their B/D won't allow them to sell products with surrender charges in excess of 10 years (with few exceptions). However, a 20+ year surrender charge would be appropriate for me. A 16-year annuity may have been appropriate for this prospect. Don't let your discomfort with a product that is outside of your box affect your judgement in what is best for the prospect.

If you need additional facts on this company or the product in question, please feel free to contact my staff at AnnuitySpecs.com.

Good luck!
sjm

 

[DANNYO]

Your thoughts on the Athene BCA 12 annuity