Best Fixed Index Annuities

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Best Fixed Index Annuities

In this guide, we will cover and evaluate the currently available fixed indexed annuities based on the following criteria.

  1. Issuing insurance company
  2. Fixed Indexed Annuity Sales History
  3. Financial Ratings
  4. Renewal Rate History
  5. Stock Market Indexes 
  6. Crediting Methods 
  7. Duration
  8. Included Riders & Waivers
  9. Liquidity
  10. Availability of additional income riders

The Issuing Insurance Company

We begin by evaluating the insurance companies that offer fixed index annuities. The insurer issuing the index annuity is arguably the single most important factor (for a number of reasons). All of the data in this section can be attributed to LIMRA Secure Retirement Institute; the trusted source for annuity research and data.

LIMRA has been a leader in research and education for the financial services industry for 100 years and by far the most trusted source for annuity sales in the U.S. today. I strongly recommend anyone interested in learning more about annuities and/ or retirement planning visit the LIMRA website. They have an endless amount of meaningful tools, research, and educational material.

Now let’s get down to the fun stuff – the actual data! Below are four tables, one for each of the last 4 years. Each table ranks the top 20 insurance companies by U.S. Individual Annuity Sales for a given year. As you give them a glance over – I’d ask you to look for insurance companies that are in the top 5 to 7 spots consistently. This will provide us some intel as to which companies are committed to the index annuity market-space with a history of success.

U.S. Individual Annuity Sales (in thousands) by Insurance Company

Source: Secure Retirement Institute ® U.S. Individual Annuities Sales Survey 
2019 U.S. Individual Annuity Sales Chart
RankCompany nameIndexed
1Allianz Life $8,358,718
2Athene $6,122,393
3AIG Companies$6,026,956
4Nationwide$5,455,800
5American Equity $4,705,319
6Lincoln Financial$4,122,282
7Jackson$3,738,838
8Global Atlantic $3,607,134
9Pacific Life$3,321,109
10Great American$3,142,476
2018 U.S. Individual Annuity Sales Chart
RankCompany nameIndexed
1Allianz Life 9,115,959
2Athene 6,563,236
3Nationwide5,146,600
4AIG 4,872,010
5Great American4,550,323
6American Equity 4,221,282
7Pacific Life3,553,965
8Lincoln Financial3,056,285
9Global Atlantic 2,839,222
10Fidelity & Guaranty2,283,105
2017 U.S. Individual Annuity Sales Chart
RankCompany nameIndexed
1Allianz Life7,483,518
2Athene 4,858,199
3Nationwide4,576,000
4American Equity 3,966,839
5Great American3,520,919
6AIG Companies3,393,274
7Brighthouse Financial2,476,959
8Midland National2,140,681
9Global Atlantic 2,042,662
10Symetra Financial1,960,896
2016 U.S. Individual Annuity Sales Chart
RankCompany nameIndexed
1Allianz Life10,197,514
2American Equity 5,724,682
3Athene 4,530,284
4Great American3,750,968
5AIG 3,615,838
6Midland National2,907,896
7Nationwide2,682,000
8Global Atlantic 2,169,906
9North American 2,049,768
10Symetra Financial1,998,789
In 2019 the Top 10 Insurance Companies based on sales accounted for 66% of the total industry annuity sales. The top 20 companies by volume represented 88% of the total annuity market.
 
The data above data makes it pretty clear right away that some insurers main focus is indexed annuities, while it appears to be ancillary for others. A history of repeated success is important when evaluating annuity products for a number of reasons. 
 
Fixed Indexed Annuities are sold by independent agents meaning they don’t work for an individual insurance company. They can contract with and sell annuities from any insurer they wish. Renewal rates are declared annually at contract anniversary. 
Reducing the rates on existing contracts is one of the fastest ways to lose writing agents and thus market share. An insurance company consistently in the top 5 most likely has good renewal rates. Some Index Annuity specifics are beyond the scope of this post but you can read our Ultimate Guide to Fixed Index Annuities should you more in-depth knowledge.

5 Best Fixed Index Annuity Companies (Based on Total U.S. Annuity Sales 2016-2019)

 2019 Rank2018 Rank2017 Rank2016 Rank
Allianz1111
Athene2223
AIG3445
Nationwide4337
American Equity5662

The above table lists the top 5 insurance companies in 2019 and their respective annual rank going back to 2016. Allianz was number one all four years, Athene three 2nd’s and a 3rd, AIG one 3rd, two 4ths, and a 5th place. 

I’ve been wholesaling indexed annuities since 2005 and know from experience that Allianz, AIG, and Athene consistently put out very good index annuity products. American Equity has been in the top three to seven for quite some time, but they are publicly for sale, rated A- with A.M Best, and cater to agents who are looking for a high commission (just my opinion) – so I will not include them as a candidate for best Fixed Indexed Annuity in 2020.

Nationwide is a very solid, financially strong insurance company that is relatively new to the Fixed Indexed Annuity space; they’ve been a top performer in the Variable Annuity market for many years. I am choosing to leave them out of contention for best fixed indexed annuity in 2020 because they use a proprietary J.P. Morgan Mozaic Index that looks good on hypothetical back-testing but hasn’t performed well at all.

And then there were three:

1. Allianz
2. Athene
3. AIG

Sales History Advantage:

Allianz

Insurance Company Financial Ratings

Financial rating is always very important to consider when shopping for an annuity because it is an indicator of an Insurance Company’s ability to fulfill it’s obligations to their policyholders. In this case, each of our final three contenders is rated A with A.M Best.  if you want to learn more about what these ratings mean our Insurance Company Financial Ratings Explained Page is a great resource.

Financial Rating Advantage:

Tie

Renewal Rate History

While an annuity company’s renewal rate history is no guarantee of future performance, good or bad, it is still something I’d always ask for when evaluating annuities. Not all insurance companies provide renewal histories and those don’t always provide them for every product every year. If you are evaluating an annuity or insurance company you are welcome to reach out to My Annuity Store, Inc. for some unbiased guidance. We will provide any documentation available and also any personal experiences our clients have had with a particular company.

I know that Athene, AIG, and Allianz all have a longstanding track record of rate renewal integrity so I would not hesitate to recommend any of the three. However, Athene offers a bailout rate, and Allianz and AIG do not. The bail-out rate is set at the time of contract purchase.  Should they ever renew rates below the bail-out rate the owner can withdraw all of their funds, including earned interest, without penalty.

Renewal Rate History Advantage:

Tie

Available Stock Market Indexes

Indexed annuities credit interest based on the performance of a market index. For this reason, it deserves serious consideration when determining the best available fixed index annuity. The number of different index options within a particular indexed annuity is equally important as the actual indexes available based on our experience. 

This again ties back to renewal rate history. At each contract anniversary, the last page of your annual statement is a re-allocation form listing the available rates for your upcoming contract year. The rates an insurance company can provide are dependent to some degree upon the cost of options for a particular index in any given year. This is an instance when having multiple, quality indexes to choose from is a huge plus. If by chance one of the indexes rates happen to decrease; the odds are you’ll still have good upside potential with at least one of the available indexes.

For purpose of time, I won’t evaluate each and every index available at our top three annuity companies here, however, you can view each of these companies product specifics at our Fixed Index Annuity Market Place should you wish. Here is our favorite market index for each of our final three:

  • Athene – (AiPex) U.S. Equity Index; the first U.S. Equity Index powered by Artificial Intelligence learns from millions of pieces of data daily and turns it into market insight picking 250 stocks monthly.
  • AIG – (MLSB) Merrill Lynch Strategic Balanced Index; a volatility managed index that adjusts allocations between equities and fixed income based on daily volatility.
  • Allianz – (BUDBI II) – Bloomberg Universal Dynamic Indexcomprised of the Bloomberg Barclays US Aggregate RBI® Series 1 Index and the S&P 500® Index and shifts weighting daily, up to 3%, between them based on realized market volatility.

Advantage:

Athene – As you can see below they offer 5 solid market indexes to choose from; four of which have uncapped crediting methods. As I write this, Athene has the best available indexes of any indexed annuity.

 

Athene avaialble market indexes with crediting strategies and rates as of april, 2020

Duration

A fixed index annuity is a contract between you and the insurance company. Each annuity contract has a duration, the amount of time you agree to hold the contract before withdrawing all of your principal and interest.  Allianz, Athene, and AIG all have 5, 7 and 10-year index annuity options available. When evaluating each of these companies as to which is best the winner of this category comes down to your investment time horizon.

Athene is best for short-term accumulation with superior 5-year crediting strategies and rates vs Allianz and AIG. AIG’s sweet-spot is currently their 7 year Power Protector 7 and Allianz is best for those looking to invest money for a period of 10 years. 

Duration Advantage: Varies by desired investment term.

Allianz – 10 years

AIG – 7 years

Athene – 5 years

Included Riders/ Waivers

Many annuities come with a nursing home/ terminal illness rider included at no cost. This means if the contract owner is diagnosed with less than 1 year to live or is confined to a nursing home or assisted living facility, the entire annuity becomes liquid with no fees immediately. In this case, all three of these companies include these provisions in their indexed annuities.

While it is not a concern in this instance, if this is something important to you we suggest inquiring about the specifics of these provisions when shopping for an indexed annuity. Some insurance companies only include them on contracts when the owner’s issue age is 76 or younger.

Advantage:

Tie

Liquidity – Annual Free Withdrawal Amounts

Annuities come with an annual free withdrawal amount, which is the amount you can withdraw from your contract annually, without penalty, prior to the end of your contract period. There are some variations but almost all fixed index annuities allow for 10% free withdrawals annually while most fixed annuities allow for free withdrawals of interest only annually.

However, there is a variation between our three companies.  AIG and Athene both allow you to withdrawal 10% of the previous year’s account value annually. Allianz on the other hand, allows you to take 10% of the original purchase premium annually. 

This means if you put in $100,000 you will be able to withdraw $10,000 each year. Whereas with the other two companies that wouldn’t be the case. For example, you take out $10,000 from a $100,000 contract in year 1 and the market doesn’t perform so your account value is now $90,000. The following year you would only have access to $9,000 which is 10% of the previous year’s account value.

Advantage:

Allianz

Available Income Riders

Many indexed annuities have optional income riders that can be purchased for a fee. The fee is charged as a percent of the income value and taken from your account value annually. Most of these riders cost approximately 1.00%.

The rider gives you the option to turn your index annuity into a guaranteed income stream at a future date. Typically, the amount of income you will receive at each given age is known up-front at the time you purchase the rider. Some companies are better for single owners while others have more favorable joint-life payout options for a husband and wife.

In this case; AIG is the best option if you plan to turn on income within the first couple of years. This is because they guarantee a pay increase each year for the first 10 years.  Other companies are quite “rolling up” the income value once you’ve turned the income on. With many indexed annuities, you simply don’t get the full value of an income rider you are paying for if you plan to begin taking lifetime income in the first 5 years.

Allianz is the best if you plan to wait at least 10 years prior to taking income. This is because their income rider is free of charge as long as you defer for 10 years before taking income.

Athene has a very competitive income rider that stacks up favorably with most companies; however, among these three options they come out on the losing end when it comes to Income Riders.

Advantage:

Allianz & AIG

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