Allianz Life Insurance Co. of North America has gained a foothold distributing its line of variable annuities through banks and is counting on the channel to help it jump into the top five variable sellers within five years, an Allianz executive said.
“We’re seeing significant lift in the bank channel already,” said Frank Tonnemaker, the president of Allianz Life Financial Services LLC, the company’s variable products division. He said that Allianz, a subsidiary of Frankfurt-based Allianz Group, has already sold about $500 million of variable annuities through banks this year.
The Minneapolis-based insurer is shooting for $10 billion of annual U.S. sales of its variable annuities, which would put it in an elite group that includes the likes of TIAA-CREF and Hartford Financial Services Group Inc. Bank sales should grow to account for 30% of the total, Mr. Tonnemaker said.
Allianz was ranked 13th among variable sellers in 2005, with about $4 billion of sales, according to the National Association for Variable Annuities, or Nava, an industry trade group. To get to No. 5 last year, it would have had to outsell Lincoln National Life Insurance Co., with $8.6 billion.
Christopher M. Condron, the chief executive officer of Axa Financial, the U.S. arm of the Paris-based insurer Axa Group, told American Banker last May that he planned to double overall sales within six years. With $10.6 billion of variable annuity sales in 2005, Axa was ranked No. 4 by Nava.
And Bruce G. Parker Jr., the CEO of the U.S. arm of Old Mutual PLC of London, said last month that his company plans to double or triple its $5 billion of 2005 U.S. revenue in three years and that one-third of the total would come from Old Mutual’s entry into the variable annuity marketplace in the first quarter of 2007.
So the variable annuity sales rankings could be a fast-moving target for Allianz.
Despite the competition in variable annuity sales, which has tripped up companies like Allmerica and the former American Skandia, conditions in the industry are shaping up in favor of deep-pocketed companies like Allianz, Mr. Tonnemaker said.
“The large financial services firms with the capacity and size to back the guarantees are the ones that are getting most of the business,” he said.
These guarantees — largely the kind meant to reassure customers that they will not outlive their retirement savings — will help Allianz do well with bank customers, who tend to be on the conservative side, he predicted.
Allianz, which sells 80% of its variable annuities through independent broker-dealers, “started moving toward the bank channel” early last year and has built a beachhead, he said.
The company has 15 direct relationships with midsize and large banks, including Wachovia Corp., and plans to have as many as 25 by yearend, Mr. Tonnemaker said. Allianz’ variable annuities are distributed through third-party marketers at another five institutions, he added.
Serving the bank channel is a team of dedicated external wholesalers that grew to 10 within the past 30 days, he said.
Though he declined to describe the size of its investment, Mr. Tonnemaker said through a spokesman that Allianz is making “a major commitment to the bank channel.”
Allianz is comparatively new to variable annuities. It entered the business “in a major way” in early 2000 — logging $215 million of variable annuity sales that year, said Mr. Tonnemaker. By last year sales had grown to $4 billion.
Though this is impressive, it “doesn’t mean that the hardest part isn’t still ahead,” said Kenneth Kehrer, the founder of the Princeton, N.J., consulting firm Kehrer-Limra.
Banks in particular are a tough distribution channel to crack because they use fewer providers than other sorts of distributors, Mr. Kehrer said. “And it’s very difficult to dislodge some of those companies, because they’re pretty good,” he said.
Allianz, moreover, is trying to move up the ranks in a market that is growing briskly.
Variable annuity sales have risen steadily during this decade, from $111 billion in 2001 to nearly $137 billion last year, according to Limra International. Banks and credit unions distributed 13% of the variable annuities sold in 2005, according to the Insurance Information Institute, which cites data from Nava and Morningstar Inc.
A key to quick growth lies in understanding that “complexity is the biggest problem the industry faces,” Mr. Tonnemaker said.
The industry leaders have partnered with large distributors and provided products that are innovative without being overly complex, he said.
