AIG Annuities
AIG is certainly a name many are familiar with. But with the financial crisis still fresh in many investor’s minds, some wonder is AIG is one of the annuity companies investors should watch out for. This AIG Annuities piece offers a look at the variety of different annuity products they offer.
AIG Annuities (Fixed)
AIG offers annuities for both individuals and businesses. Their different types of annuities include variable annuities, index annuities and income annuities. AIG is commonly associated with its fixed annuities and ranked #4 in fixed index annuity sales (nearly $3.3 billion) for 2015.1 This represented a 162% increase from 2014, bolstered by continued low interest rate options in the market. AIG operates three subsidiaries- American General Life, Variable Annuity Life Insurance Co. and United States Life Insurance Co (NYC). These three subsidiaries account for 30 different indexed annuity options.2 Here are a few popular AIG annuities:
- Assured Edge Income Builder-Guaranteed lifetime withdrawal benefit (GLWB), rising income opportunity, $25,000 minimum initial premium.
- American Pathway SolutionsMYG Annuity-Multi-year guarantee
- American Pathway Fixed 5 and Fixed 7 Annuities-single premium, tax deferred annuities
The American Pathway Solutions Multi-Year Guarantee annuity is marketed as a “conservative and flexible addition to your retirement savings”. This is because of their guaranteed income stream for life’ after annuitization begins. Annuitization is a term used to describe when your principal (premium) permanently converts into an income stream.
Further, this fixed annuity has a free withdrawal privilege which means that after the first contract year, 15% of annuity value can be withdrawn annually with no withdrawal charge or Market Value Adjustment (MVA). A market value ‘adjustment’ occurs when you take an early or excessive withdrawal from your annuity.
Keep in mind, in a rising interest rate environment, the MVA will result in a decrease in your withdrawal. Conversely, a decreasing interest rate environment will result in an increase from the withdrawal (not assuming surrender charges and other penalties, etc.). AIG uses the Treasury Constant Maturity Series to measure interest rates. This is reported by the Federal Reserve.
AIG Annuities (Income)
AIG also offers both immediate and deferred income annuities, designed to provide predictable income streams and flexible payout choices.
- American Pathway Deferred Income Annuity-Can defer the income stream for 1-30 years
- American Pathway Immediate Annuity-Can begin receiving income in 30 days.
With the deferred income annuities, you are preparing for a future retirement date, trying to guarantee a stream of income you won’t outlive. The American Pathway Deferred Income Annuity does offer a Commutation Withdrawal Benefit, in the event you need access to your money above the scheduled payments. This allows you to take a one-time withdrawal of up to 100% of the value of the remaining guaranteed income payments as a lump sum. Check your state to see if this is available to you. Keep in mind, the commutation withdrawal could be fully taxable, so check with a tax professional or your financial advisor about your individual situation.
Credit Ratings for AIG Annuities
If you own AIG annuities, it is very important to review the credit ratings of these large insurance companies since the promised annuity payments are backed by the claims paying ability of the insurance company. The major credit rating agencies have the following credit ratings for AIG Life and Retirement (AIG L&R)3:
Agency Rating Date of Latest Action
AM Best A (under review negative)
Fitch A+ (outlook negative)
S&P A+ (outlook stable)
Moody’s A2 (outlook stable) Affirmed Feb. 17, 2017
The credit ratings above apply to AIG’s L&R division, since this is what affects the annuities. These credit ratings can, and will, change so be sure and check back for any credit updates. Keep in mind, ratings agencies often rely on past data and their predictive abilities aren’t always so prescient when it comes to rating financial institutions.
The investment portfolio can be considered the war chest for any life insurance company. It is out of this portfolio that funds are generated to pay claims. American General is the subsidiary that runs AIG’s life insurance division. As of the end of 2016, AIG’s life insurance division had total total cash and invested assets of $144 billion.4 The investment portfolio is considered conservative, with 80% invested in bonds (93.5% of which are ‘investment grade’).5 But keep in mind, in a rising interest rate environment, all bonds that aren’t floating rate will lose value. Further, nearly 10% of the portfolio is invested in mortgages.
Maybe the more alarming statistics come from their investments in hedge funds-or their retreat from. In early 2016, AIG had roughly $11 billion invested in hedge funds.6 These active managers have failed to keep pace with the market. Instead, investing in passive funds, such as ETFs, that track the averages has become gospel.
But now, AIG is planning to move about half of this investments out of hedge funds. Unfortunately, with markets as toppy as they are now (mid-2017) being in actively managed investments that offer some downside protection and non-correlation to equities should be beneficial in the near future.
Selling an Annuity from AIG
If you decide that your annuity is not in sync with your current financial requirements, you do have a few options.
If they are transferable, selling your AIG annuities shouldn’t be difficult. There are several third-party annuity buyers who have been purchasing the annuity payments from owners for many years. The annuity owner sells their rights to the future payments and receive a lump-sum cash payment.
Annuity owners can also sell just part of the payments if they need cash now for an unforeseen emergency, while still keeping some income coming in. If this describes like your financial situation, consider getting a free quote to see how much cash you can get from selling your AIG annuity.
Other Annuity Companies like AIG:
- New York Life Annuities
- Prudential Annuities
- MetLife Annuities
- Nationwide Annuities
- Genworth Annuities
- AXA Annuities
- Jackson National Annuities
- Forethought Annuity
3http://www.insurancejournal.com/news/national/2016/01/28/396732.htm