Sun America Insurance Company Review
Although many investors don't realize it, SunAmerica is a division of AIG or the American International Group. AIG was the insurance giant that came close to default in 2008 after the financial analysis firms lowered its credit rating to AA. SunAmerica should not to be confused with Sun Life, the Canadian insurance company which also operates in the US.
The Wall Street Journal has reported that AIG is planning to consolidate all of its domestic life insurance and retirement products under the SunAmerica Financial Group banner. The SunAmerica website; however, currently contains only information about retirement products and not insurance. Instead it appears that online sales of AIG insurance products have been moved to another of the company's subsidiaries, American General.
A large number of banks and brokerages discontinued the sale of AIG insurance policies and annuities after the company needed a bailout of $85 billion from the Federal Reserve to stay afloat in 2008. On Jan. 28, 2011, the Wall Street Journal reported that Edward Jones (one of the nation's most respected retail brokerages) had decided to start selling SunAmerica's variable annuities again.
Financial Ratings for SunAmerica
Despite the controversy, SunAmerica seems to be recovering from the financial crisis. On April 25, 2011, Forbes reported that Fitch Ratings had raised the company's grade from A- to A.
Fitch analyst Julie Burke told Forbes that the move was prompted by higher earnings, lower investment losses, and improved financial numbers. Burke also noted that SunAmerica's operating earnings had increased from $2.3 in 2009 to $4 billion in 2010. Yet she emphasized that these improved earnings do not affect the rest of AIG of which SunAmerica is still a part.
SunAmerica gets good, but not great, ratings from the other financial ratings companies. In the most recent round of analysis reports, Moody's gave it a rating of A2, or good. Moody's stated that the company is financially secure but vulnerable to future market conditions. A.M. Best rated it Aaa, or excellent, and stated that the company was in a good condition to meet its financial obligations. Standard & Poors, (S&P) rated the insurer A+ and stated that it had strong financial characteristics.
Variable Annuities from SunAmerica
Currently, SunAmerica's major product is a family of variable annuities it calls Polaris. These appear to be fairly straightforward plans that allow for investment in a variety of top-rated mutual funds. Individual investors get the ability to choose how much of their money will be placed into equity investments.
Pie charts on the company's website show that as much as 44% of the funds in one of these annuities can be invested in equities. This would presumably give investors a higher return. Unfortunately, the fees and rates charged on these products are not reported.
Two methods of crediting the sub accounts (dollar cost averaging and automatic asset allocation rebalancing) are mentioned. The rebalancing seems to be the better deal because it is an automatic reset that insures against market losses. The SunAmerica variable annuities offer good terms but the lack of information about fees warrant further investigation.
Other Products from SunAmerica
At the present time, SunAmerica does not seem to be offering life insurance policies to the general public. Instead it is concentrating on annuities and other retirement products.
No information about the policies the company issued in the past is made available on the website. These policies are presumably being serviced by American General.
Its website mentions what it calls "optional benefits" which sound like insurance features tacted onto retirement products like annuiteis. Other benefits include retirement income protection and beneficiary protection which indicates can be added to standard annuity contracts.
SunAmerica provides retirement planning services, including rollovers and small business IRAs. From the information available on SunAmerica's website, the company is now focusing on retirement planning and investing. The investment vehicles mentioned on its site include a "non-qualified annuity." This product seems to be designed to pass assets onto heirs. It is also unclear what tax advantages or deferments this product provides.
The range of retirement products SunAmerica is making available seems limited. It is quite possible that the company will make more products available in the future as it completes its restructuring.
This uncertainty is increased by the possibility that AIG could sell SunAmerica in the near future. AIG has already sold off some of its other insurance subsidiaries in the past year, so such a move is within the realm of likelihood. The focus on annuities could be a preparation for a sale. The market for such financial products is growing so it might be easy to find a buyer for SunAmerica.
Investors should be cautious about SunAmerica given its recent history. In particular, potential investors should be aware of the ever-changing relationship to AIG.