The index will be exclusively available via a fixed index annuity (FIA) offered by the US insurer.
Going live today (15 July), the rules-based Patriot Technology Index (PATRIOT) aims to provide a balance between growth potential and asset protection by offering exposure to companies that are aligned with the US Department of Defense's (DoD) critical technologies list.
There’s a lot going on with deglobalisation, which we felt are tailwinds for us and will benefit American companies - Chad Ferrell, American National
With a seven percent volatility control overlay, the multi-asset play is the first custom index for the Galveston, Texas-based insurer, which was acquired by Brookfield Reinsurance at US$5.1 billion two years ago.
The index is now available via American National’s Strategy Index 10, adding to the FIA’s existent index options which comprise the S&P 500, S&P MARC 5% and Nasdaq 100.
BNP Paribas (BNPP) acts as the index sponsor and derivative manufacturer while BNP Paribas Financial Markets SNC is the calculation agent.
“There’s a lot going on with deglobalisation, which we felt are tailwinds for us and will benefit American companies,” Chad Ferrell, senior vice president, chief of life and annuity distribution at American National Group, told SRP. “
The unique theme is prompted by the current FIA market, a “very crowded” space, given the sheer number of proprietary or custom indices out there, he added.
In the US, a FIA is a fully capital-protected annuity product featuring tax deferral with return referenced to an index. The market has hit an all-time high after amassing US$95.9 billion sales volume in 2023, at a comparable scale of registered structured notes in the country.
“The theme is administration agnostic,” added Ferrell. "We believe that this index will do well given the interest level of the government if the US administration does change hands, it can accelerate [the deglobalisation].”
The US 2024 elections are scheduled to be held on 5 November.
With a 10-year surrender period, the Strategy Index 10 annuity is available in all states, including New York as well as main markets - Texas, California and Florida, targeting independent distribution channels.
A surrender period of seven years is likely to be made available for the FIA suite to cater to banks and non-independent broker-dealers, added Ferrell.
The account linked to the PATRIOT Index employs one-year point-to-point uncapped crediting strategy, among a total of seven payouts for the flexible premium FIA.
The multi-asset index is "a highly differentiated and exclusive index strategy to market", according to Ryan Cullen, head of equity derivatives insurance solutions sales at BNPP.
From start to complete, the process took approximately four months between the two partners, starting early this year, according to Ferrell.
Late last year, American National had planned to launch a custom index on alternative investments in partnership with HSBC for its FIA. The annuity carrier declined to comment on this deal that eventually fell through.
Custom exposure
The excess return index invests in US large and medium cap companies in 14 technologies the US DoD defines as “dual-use, disruptive, emerging or critical to national and economic security” by passing a critical technology screen.
The constituents have “a low relative exposure to geostrategic risk and foreign influence” as determined by J.H. Whitney, a New York-based geopolitical risk consulting firm.
Solactive owns and calculates the underlying equity component - Solactive Whitney US Patriot Technology Index TR (SOLUPTIT). The German provider is behind several other indices used by FIAs as it seeks to come behind in this sizable segment.
In addition, the target of an annualised realised volatility of seven percent is achieved through two layers - fixed income is added using interest rate futures as well as bond futures to dampen volatility, followed by a hypothetical cash position.
Post-acquisition
The past few years has seen a continuing heavy capital stream from private equity firms to the insurance space, further boosting the growth of FIAs and registered index-linked annuities (Rilas) on top of US interest rate hikes.
Brookfield Reinsurance, a 'paired entity' of Brookfield Corp, completed its acquisition of NYSE-listed American Equity Investment Life in May following its buyout of American National.
Compared with its new sister company based in Iowa, which was the fifth largest FIA issuer in 2023 with US$7 billion sales, or 7.3% market share, American National is at a noticeably nascent stage in the FIA segment.
In the hands of the new owner, the privately-owned company has predominantly focused on multi-year guarantee annuities (MYGAs) since last year. Its fixed annuities sales reached US$4.5 billion for 2023 and US$2 billion for the period from January to May, according to Ferrell.
American National reported US$851.5m and US$52.4m fair value of embedded derivatives for FIA and index-linked universal life (IUL) as of 31 March, compared to US$826.3m and US$46.4m as of the end of 2023, respectively.
“As we get into the second half of the year, some additional FIA strategies will be introduced in the accumulation space,” said Ferrell.
“We’re certainly not shifting away from fixed annuities but looking to grow by adding FIA to what we do,” noted Ferrell without disclosing the issuer’s FIA sales target.
Before the acquisition, there was “never a real huge appetite” on the annuity side where the firm's record sales for a single year was US$2.5 billion, the life & annuity distribution head recalled.
“Post-Brookfield, I would say the biggest change is more of a narrowed focus,” said Ferrell, referring to individual retirement solutions. “There are things that we’re going to do in a bigger way.”
Do you have a confidential story, tip or comment you’d like to share? Write to summer.wang@derivia.com