Security Benefit's President Likes Selling Annuities

He explains that Security Benefit is doing well partly because its distribution strategy has buffered it from some of the forces hurting other annuity issuers' sales.

The company relies mainly on a relatively small number of close relationships with regional banks, independent marketing organizations, independent broker-dealers and DPL, not a large number of distributor relationships, Wolff said.

In March and April 2020, Security Benefit invested in structured securities and other assets with an approach based on the assumption that the steep pandemic-related downturn would be temporary, and that assumption turned out to be correct, Wolff said.

Because Security Benefit kept investing at a time of wide spreads between what Security Benefit could earn on its own investments and what the company was promising customers, the company's investment portfolio has performed well, Wolff said.

Strong investment returns helped Security Benefit respond to falling interest rates in an orderly way, without making the sudden crediting rate cuts that some other companies did, Wolff said.

Most life insurers focus heavily on investments in corporate bonds, mortgages and mortgage-backed securities.

Security Benefit has more money invested in other types of assets, such as collateralized loan obligations, and that has also helped keep performance steady, Wolff said.

Annuity Trends

One type of Security Benefit annuity that's performed well is a fixed annuity contract that offers a one-year rate guarantee. In some ways, the contract is like a one-year multi-year guaranteed annuity, Wolff said.

The company is now looking at offering a registered index-linked annuity, or contract that provides a defined level of account value protection for the annuity holder, rather than a flat promise to protect account value.

Wolff said he continues to be optimistic about Security Benefit's ability to sell commission-free annuities through fee-only RIAs. He noted that DPL has built up a good menu of fee-only contracts, and interest continues to grow.

"We think that's a really green field," Wolff said.

Now that bond yields are so low and bond fund returns are more volatile, RIAs are more interested in using annuities as an alternative to other fixed-income investments, he said.

Another trend Wolff sees is a move away from reliance on living benefits and toward products that maximize the holder's ability to accumulate assets.

Wolff said he has not yet seen the SECURE Act have a big effect on sales. But if Congress pushes the required minimum distribution age far past the current age of 72, that could have a bigger effect, he said.

Doug Wolff (Photo: Security Benefit)