If you're thinking about buying a fixed annuity (it's a pretty good bet, because you're here), how do you know what company to buy from? There are 773 life insurance companies in the US and over 1500 fixed annuity products. One way to start is to find out who the top sellers are.
Fixed annuities are complicated, they’re contracts between you and the insurance company and they can be more than just a bit confusing. Independent insurance agents are annuity professionals, and their job is to simplify the process. Every day they help folks just like you make smart decisions.
The Top 20 Fixed Annuity Companies
We’ve put together a handy chart to show you the sales ranking, financial strength ratings, and J.D. power satisfaction ratings (where available) of the top 20 fixed annuity companies by sales.
Claims Paying Ability Tier ***
|Rank By Premium Sales*||Company||A.M. Best||S&P||Moody's||Fitch||J.D. Power |
|2||N.Y. Life||HIghest||Highest||Highest||Highest||Among The Best|
|3||Global Atlantic Financial||Highest||Highest||Medium||Medium||Not Rated|
|6||Athene Annuity & Life||Highest||Highest||N/A||Medium||The Rest|
|9||American Equity Investment||Highest||Highest||N/A||N/A||Better Than Most|
|10||Great American||Highest||Highest||Medium||N/A||About Average|
|12||Fidelity & Guaranty||Highest||Medium||Medium||Medium||Not Rated|
|15||Security Benefit||Highest||Highest||N/A||Medium||Not Rated|
|15||Western Southern||Highest||Highest||Highest||Highest||Not Rated|
|17||Principal Financial||Highest||Highest||Medium||Highest||Not Rated|
|18||Midland National||Highest||Highest||N/A||Medium||Not Rated|
|19||Delaware Life||Highest||N/A||N/A||N/A||Not Rated|
|20||American National||Highest||Highest||N/A||N/A||Not Rated|
* Source: LIMRA Secure Retirement Institute U.S. Individual Annuities Sales Survey 2nd Quarter 2019
** Source: JD Power 2019 U.S. Life Insurance Study
*** Ratings obtained from company websites as of 3-3-2020.
What Does the Insurance Company Do with the Money?
Companies that sell fixed annuities have to be licensed as life insurance companies by the state where they are selling. When you contribute to a fixed annuity, the life insurance company puts the money into its general account. The general account is largely a portfolio of corporate and government bonds. The interest the insurance company pays to you is based on what they earn from the portfolio. Here's why that's important. When you invest in bonds, the value can change up or down depending on interest rates. The insurance company guarantees your fixed annuity account value and rate of interest regardless of how their bond portfolio performs. What that means is when you purchase a fixed annuity, you are getting the benefits of a large, professionally managed bond portfolio without any investment risk. Insurance companies take some additional steps for indexed annuities, but the basic concept is the same.
The bad news? If the insurance company goes bankrupt, your money can go with it. That's why it's important to buy a fixed annuity from a reputable and financially strong insurance company. Financial strength ratings of insurance companies are available from A.M. Best, Moody’s, S&P, and Fitch.
What's the Difference Between Fixed Annuity Companies?
Life insurance companies tend to specialize in products. They often make decisions to be more competitive in certain areas and not in others. Larger companies with the highest financial strength ratings tend to be less competitive than smaller companies with lower ratings. Why? Because they can. Many consumers are willing to pay for the higher ratings.
Life insurance companies also differ in who sells their product. Some companies, called career companies, have agents that only sell their products. Other companies sell their products through banks and other financial institutions. They may also sell through independent insurance agents.
Life insurance companies are either owned by the policyholders (mutual companies), or by stockholders (stock companies).
What Do You Want to Accomplish?
Fixed annuities are retirement products. They should fit into your retirement plan. If you haven’t done any retirement planning yet, that should be your first step. That said, here’s a quick review of fixed annuity features:
- Tax-deferred growth: There is no tax on interest credits until there are distributions.
- Guaranteed interest rates: Fixed annuities offer guaranteed rates of interest. They are predictable. Some fixed annuities, called fixed indexed annuities, offer interest credits based on the performance of a financial index with a guarantee of the principal.
- Guaranteed lifetime income: Fixed annuities have many options to create a guaranteed lifetime retirement income. Options are available for one lifetime, or the longer of two lifetimes.
How Do I Know I’m Buying from a Quality Company?
One good thing to know is if other people are buying from this company. Are they a leader? While it doesn’t tell you about the company, it’s a good indication that financial professionals have some confidence in them.
It’s true that Mom says, “If your friend jumped off a bridge, would you do it too?” While that’s good advice, it doesn’t apply here.
How does the company treat its customers? One way to find out is J.D. Power's consumer satisfaction survey of annuity companies. They use a rating system of Among The Best, Better than Most, Average, and The Rest.
Fixed Annuity Company Ratings
Fixed annuities are long-term investments. You are going to want to know that the insurance company will be around as long as you are. Financial rating agencies, A.M. Best, Moody’s, S&P, Fitch, and others analyze life insurance companies. They publish financial strength ratings which is their opinion of the company’s ability to pay policyholder obligations.
Each agency has its own methods, but the big picture is consistency. If all the agencies rate a company highly, it’s a good sign. While the rating agencies use different systems of measure, all of them break down into the categories of high, medium, and low ability to meet policy holder obligations.
|Highest Ability To Meet Obligations||Medium Ability To Meet Obligations||Lowest Ability To Meet Obligations|
|A.M. Best||A++ To A-||B++ To B-||C++ To C-|
|Moody’s||Aaa To Aa||A To Baa||Ba To Caa|
|S&P||AAA To A||BBB To B||CCC To C|
|Fitch||AAA To AA-||A+ To BBB-||BB+ To CC|
What's So Great About an Independent Insurance Agent?
Fixed annuities can be an important part of your retirement plan. While they have many features and benefits, they are not for everyone. Fixed annuities can be complex, and searching through options can be confusing, time-consuming, and frustrating. An independent insurance agents role is to simplify the process.
Independent insurance agents work for you, not the insurance company. If a fixed annuity is right for you, they’ll see you through the process, start to finish. Now that’s a whole lot easier, isn’t it?
TrustedChoice.com Article | Reviewed by Jeffrey Green
©2020, Consumer Agent Portal, LLC. All rights reserved.
Fitch Ratings Definitions
Moody’s Moody’s rating scale and definition
S&P Global Understanding Ratings
A.M. Best Why An A.M. Best Financial Rating Is Important
Statista number of life insurance companies in U.S.
LIMRA 2019 2nd quarter annuity sales report
J.D. power annuity company satisfaction survey