Happy Days/Crazy Days

When I started writing this article, it was before September 11, 2008. I was almost in a state of wild euphoria, because the annuity business was doing so well.

But within a few days, the insurance world has gone from Happy Days to Crazy Days. With the collapse of AIG, Lehman Brothers, Fannie Mae, and Freddie Mac, the world monetary system is now in a state of panic.

Before this happened, my phones were ringing off the wall from people interested in buying annuities.

Now, my phones are ringing off the wall with clients wanting to know if their money is safe in annuities, or if their insurance company is going to go “bankrupt like AIG.”

I’m also receiving calls and e-mails from vulture marketing operations offering to move AIG annuities to their “safe” companies before it is too late. I abhor solicitations like these.

This is the clearest, most overt example of how the entire insurance business is drastically upset when one large insurer is perceived to be in trouble and the sharks start feeding on the weak.

All annuity professionals need to sit tight, to see when and how the dust will settle. In the meantime, let’s revisit what the annuity environment was like just a week earlier.

Before September 11, 2008, annuity rates were higher than bank certificate of deposit rates. Considering the volatility of the stock market, fixed annuities look very attractive to a whole host of new prospective buyers.

That meant that, for the past few months, money was once again pouring into fixed annuities. In fact, I had had some of the best sales months in my career during that period. As indicated above, my phone was literally ringing off the wall with people calling wanting to come in and put money into multi-year guaranteed (MYG) interest rate fixed annuities–products that offer higher rates than CDs.

People were putting in hundreds of thousands of dollars at a time in these products, and my average size case rose dramatically. Half-million dollar cases were common.

The takeaways: Although politicians keep talking about people wanting change in America, some things never change. People still want guaranteed rates and guaranteed values with lots of flexibility.

The MYG annuities respond to this need, because owners can buy several and ladder interest rates with different insurers. That maximizes flexibility and also safety of funds under the state guaranty law. As a result, annuity firms have been taking in lots of new money, as opposed to just transferring existing annuities between companies.