Athene Annuity and Life Insurance Company has an A rating from AM Best and is a key player in the annuity business in the United States.
How does Athene annuity work?
Fixed indexed annuities are insurance products that give both downside market risk protection and growth potential by delivering a fixed interest rate for a set period of time, as well as the possibility of additional interest credits depending in part on the performance of a market index.
An FIA’s retirement savings are not invested directly in the stock market. Instead, interest credits change in response to one or more reference indices’ performance. When an index rises, the value of the annuity rises as well: Interest credits are applied to the share of the annuity’s accumulated value that is allocated to that index’s crediting strategy. When the market falls, the interest rate falls to zero, but the annuity holder’s initial premium—as well as any previously credited interest—remains intact. As a result, market downturns do not affect retirement funds.
While all FIAs have the same basic characteristics—the ability to profit from market development without taking on the dangers of direct market participation—the specifics may differ. In terms of which benchmark indices they track, how often they assess changes in the indices, how they establish crediting schemes, and what additional benefits they may provide, indexed annuities differ.
- What are the annuity’s underlying indices? While the S&P 500 is the benchmark for nearly half of all FIAs, others follow hybrid or alternative indexes meant to pursue specific strategies, such as noncorrelation to major stock indices and/or targeting specialist asset class groupings.
- How are index returns calculated in an annuity? Changes in the index from the beginning to the conclusion of a certain time, such as a month or year, can be calculated using FIAs. A point-to-point strategy is what it’s termed. Furthermore, the monitored return may include or exclude dividends (total return) or returns above the risk-free rate (excess return) (excess returns).
- What is the crediting strategy for the annuity? Interest credits in an FIA are usually calculated using a formula such as a cap (a maximum rate of return) or participation rate (the percentage of an index’s return credited to the annuity), or a percentage-based fee such as a spread. For example, if the benchmark index returns 8%, an FIA with a 4% cap will earn a 4% interest credit; an FIA with a 90% participation rate will receive a 7.2 percent interest credit; and an FIA with a 2% spread will receive a 6% interest credit.
- Is there a way to add more riders to the index? At an additional expense, clients can choose to add features to their annuity. Guaranteed lifetime income, liquidity alternatives, a premium bonus, and death benefits are all possible riders on FIAs.
FIAs in action
Consider a hypothetical FIA that employs the S&P 500 as its benchmark, a 50% participation rate, and a one-year point-to-point strategy to examine how these formulas convert into annuity returns:
Are annuities a good investment in 2020?
Annuities are a fantastic method to enhance your retirement income by delivering a steady source of income. After exhausting other tax-advantaged savings accounts, such as a 401(k) or an IRA, many people purchase an annuity. Annuities are insurance products that promise a steady stream of income in retirement.
How old is Athene insurance company?
In premarket trading, the company’s stock was up over 19 percent, while Apollo was up 4.7 percent.
Existing Apollo stockholders will possess around 76 percent of the merged business, with Athene investors owning the remaining shares. The transaction is expected to close in January 2022.
Apollo also said that the board’s conflicts committee has authorized measures that will result in a simpler, more transparent corporate structure, which will be implemented by January 2022.
Last month, the private equity firm said that it will review its corporate governance structure, with the goal of eliminating shares with special voting rights, which now give Black and other co-founders effective control of the company.
Athene, which was founded in 2009 and serves as Apollo’s partner insurance firm, had total assets of $202.8 billion by the end of 2020, with operations in the US, Bermuda, and Canada.
Who owns Athene Annuity?
Athene’s total equity value is estimated to be around $11 billion as a result of the all-stock deal. Apollo owns roughly 35 percent of the outstanding Athene class A common shares, together with certain of its associated parties and employees. Based on the March 5 close, the amalgamated organization would have a pro forma market cap of $29 billion, making it eligible for inclusion in the S&P 500.
What is a multi year guaranteed annuity?
A multi-year guaranteed annuity, or MYGA, is a fixed annuity that guarantees a fixed interest rate for a set length of time, often three to ten years. A MYGA is suited for someone approaching retirement who seeks tax deferral and investment return assurance.
What are buffered annuities?
A buffer annuity is a variable annuity that resembles an indexed annuity in several ways.
Indexed annuities track the performance of a market index, allowing investors to share in some of the gains. These products usually provide some loss protection and set a limit on the amount of money you can make over a set period of time.
Buffer annuities, like indexed annuities, link investment returns to a market index, but they often have higher market participation caps than indexed annuities, in exchange for less loss protection.
- Each rolling 12-month period, caps limit your upside potential. Let’s imagine your annuity had a maximum of 11 percent. You would get a 5% profit if the index returned 5%. Even if it returned 20%, 30%, or more, you would only make 11 percent.
- Buffers limit your losses up to a particular point throughout the 12-month period, after which you’re responsible for any losses. If your annuity has a 10% buffer and the index drops 10%, your annuity will lose 10% of its value. The insurer will cover the loss in this situation, and your return will be flat. If the index drops 25%, the insurer absorbs the first 10% while you bear the brunt of the loss for the remaining 15%.
Bear market losses are, by definition, greater than the safety provided by a normal buffer annuity, which covers the first 10% of losses. (A price drop of 20% or more from a recent peak is usually considered a bear market.) During the Great Recession, the US bear market from 2007 to 2009, the S&P 500 lost over half of its value. The bottom line is that a 10% buffer will lessen the impact of market losses, but it won’t completely protect you.
Does Suze Orman like annuities?
Suze: Index annuities aren’t my cup of tea. These insurance-backed financial instruments are typically kept for a specified period of time and pay out based on the performance of an index such as the S&P 500.
Why do financial advisors push annuities?
The goal of the bank and its securities division is to make money. This would be acceptable if all of the bank’s product offers were compensated equally, allowing for unbiased advise. This is not the case, as annuities offer the bank and its sales force with the most money (6-7 percent average commission for the salesperson).
Annuities are expensive because they are insurance-based products that must cover the cost of the benefits they provide. Many annuities, for example, guarantee that your principal will never be lost while still allowing you to gain money through separate accounts comparable to mutual funds. The reality is that your beneficiaries, not you, are guaranteed your principle at your death, which is a better explanation of this offer. If you were nearing retirement during the financial crisis, this assurance was of little use.
A variable annuity’s average expense, according to Morningstar, is 2.2 percent. If you put $10,000 into an annuity and the market yields 8%, you should have $30,882 after costs in 20 years. Instead, you might have $44,498 if you invested in a 0.20 percent index portfolio; that’s an extra $13,616!
The annuity is marketed to younger investors as a tax-deferred investment vehicle. A variable annuity will provide you all that, but at a price. I’ve discovered that the best vehicle for investors who have maxed out their 401ks and IRAs and are looking for tax-sheltered retirement savings is a taxable, tax-efficient portfolio. With the growing popularity of Exchange Traded Funds (ETFs), an investor can establish a tax-efficient portfolio for less than 0.30 percent of their portfolio value.
Why do people fall for annuity bait and switch schemes? It all boils down to the salesperson’s persuasion and the bank’s play on the customer’s anxieties of investing. Many bank customers would never invest in the stock market because they believe it is too hazardous. The annuity looks to provide the consumer with the protections he or she seeks. Always keep in mind that there are no free lunches. If something sounds too good to be true, it probably is. There are several options for managing investment risk that cost a tenth of what an annuity does. These solutions can be explored with the assistance of a fiduciary fee-only advisor.
