Evaluating Annuity Companies

There are all sorts of insurance companies I’d never do business with, for one reason or another.  Sometimes it’s because of the products, past experience or even financial strength. I like to be confident about the recommendations I make and 19 years in the business have taught me a thing or two about evaluating annuity companies.

Recently, I learned that one of the companies I don’t prefer is under review by AM Best with the potential for their financial ratings to be downgraded. I don’t delight in people feeling pain but it was vindication after telling dozens of people to stay away from the company for various reasons. No one wants to hear that the company they trusted with safe assets is under review for not being as safe as promised.

I had wanted to do a newsletter and podcast about the products from this company for a long time but news of financial trouble was almost too good to ignore. So I called Ashok Ramji, the man who started the podcast with me. He had the same concerns with this company and we both knew agents that sold millions worth of the company’s annuities. Ashok reminded me of something very important. We, as agents, are restricted from using financial strength ratings as a negative point to sell against any company. In other words, we can’t trash a poorly-rated company in order to sell something from a stronger company.

Plus, having such a negative piece of information about one specific company could bring negative attention to my website. Ashok had a better idea; use this opportunity to highlight the things people should consider to find the best companies to use.

A lot of people have asked where Ashok went and my answer has been the same. He didn’t go anywhere but instead wanted to take a step back. This is my website and my content but he had inherited some responsibility for creating the content and that wasn’t his intention. Plus, it became really hard for two busy people to find an acceptable time each week to record something. So now he is a contributor when things work out and he joined me for this episode and you can find it by clicking here.

Since it is important to know why we recommend certain companies, it was important to document what we have learned over the years. Detailed information you’ll find in the podcast is below:

  1. A look at financial ratings. What do they mean and how can you compare companies? Some companies are only rated by one major agency while others are rated by all four. This makes a difference when you look at how companies are ranked for financial strength.
  2. How to evaluate an insurance company’s investments. Some companies have lower ratings because they invest in lower rated bonds that may pay higher interest. This is a really big deal for anyone who doesn’t mind a little extra due diligence to make sure an annuity is as solid as can be.
  3. Risk-based capital ratio. Regulators set a minimum amount of reserves that must be on hand to handle fluctuations in the business cycle. It depends on the size of the insurance company and the level of risk the company holds in its investment portfolio. It is directly related to the two factors above.
  4. Much of this information is available to consumers via the National Association of Insurance Commissioners website. You can search for any company at this link:  https://content.naic.org/cis_consumer_information.htm
  5. My last point was to tell everyone why I believe customer service to be very important when you choose a company to deal with. This is something you’ll never know until you figure it out for yourself but that’s where our experience comes in. We aim to direct you to companies that value your business and prove it by the way you are treated.

This is not a subject that everyone will absorb right away, nor is it even something that many people worry about. The hope is that whichever agent you decide to work with has considered all of these factors before making a recommendation. This is something both Ashok and I do on a regular basis and we like to offer it to those who don’t mind a little extra homework.

Check out the Podcast

Before you jump right into an insurance carrier, there are a lot of critical points to consider. The market comes with uncertainties. That’s why it’s good to have a safety net so you can protect your money. Nitpicking the best company that suits your standards can be complicated too. There are many factors to consider, but don’t fret because this episode will break it all down for you.

Coming back as a fan favorite is Ashok Ramji, the Co-host of the Annuity Straight Talk Podcast. Today Bryan and Ashok will clear out some confusion and give you their firsthand insights on how you can confidently decide where to put your money, buy annuities, and pick the ideal carrier of your choice. Simplifying over-complicated processes to bring you the utmost convenience. They also explain the importance of checking a company’s annual rating, assessing risks, and so much more. So get your pens and papers ready because this will be a session that comes in a complete package.

What You’ll Learn In This Episode:

[3:37] Evaluating an insurance carrier, and what are certain things that we should be looking at to know that an annuity belongs to a certain retirement proposal?

[6:15] The reason why people buy annuities?

[7:03] Why do some producers like to work with lower-rated insurers?

[8:56] How do you assess the riskiness of an insurance company?

[9:06] Looking at the company and credit ratings

[15:33] What is a Comdex ranking?

[22:29] Certain factors to look at when you invest in an annuity

[23:54] The Risk-Based Capital and its Six Classes

[37:19] The importance of customer service

Key Quotes:

  • [5:39] “The insurance company in itself kind of protects each other in a lot of ways.”
  • [8:48] “The greater the risk, the greater the return.”
  • [35:36] “It may be a little bit harder for people to assess these companies with private equity ownership because what worked 20-30 years ago in terms of the way these companies are structured now in the new landscape isn’t quite the same. “
  • [39:00] “We want happy people having fun, we want people who work for a great company that are enjoying what they do and adding to people’s lives”


Further Readings:

Fixed Indexed Annuity Withdrawals

Indexed Annuity Crediting Methods

Uderstanding Index Annuity Fees

Last Updated on May 10, 2024 by Bryan Anderson