March 16, 2012

Record Sales for Income Annuities in Q4 2011: Beacon

Indexed annuities stayed flat as income annuities gave ‘the most retirement income bang for the buck’

Setting a record, income annuity sales grew almost 18% in fourth-quarter 2011 and nearly 7% for the entire year, according to estimates from the Beacon Research Fixed Annuity Premium Study released Friday.

This compares to indexed annuity results, which stayed flat compared to Q4 2010 and fell 0.3% year over year. Total annual fixed annuity sales fell 1.1% to $75.6 billion, according to Beacon.

Jeremy Alexander, CEO of Beacon Research, pointed to the difficult interest rate environment.

“Income annuities did remarkably well, considering that lower interest rates and a flatter yield curve reduced payouts,” Alexander said in a statement. “Income annuities generally provide the most retirement income bang for the buck. Sales results indicate that advisors and their clients are becoming aware of how these products can be used to create a personal pension.”

Guaranteed lifetime income benefits helped sustain indexed annuity sales despite lower cap or participation rates, he noted.

For the year, income annuity results advanced 6.6% to $8.48 billion from $7.96 billion. Indexed annuities fell 0.3% to $32.98 billion from $33.08 billion.

The Beacon study, which tracks the sales of some 600 fixed annuities, found that the fourth quarter’s top five products and their rankings were unchanged from the prior quarter. All were indexed annuities except for New York Life’s Lifetime Income Annuity, which remained in second place. The top five products were:

  1. Allianz Life:  MasterDex X, Indexed
  2. New York Life:  NYL Lifetime Income Annuity, Income
  3. American Equity:  Retirement Gold, Indexed
  4. American Equity:  Bonus Gold, Indexed
  5. Aviva:  Balanced Allocation Annuity 12, Indexed

“As we expected, seasonality and the worsening interest rate environment drove a sequential drop in fourth quarter’s results,” Alexander said. “Fixed annuity sales typically fall to a certain level when the rate environment is unfavorable and remain there until rates and the yield curve improve. Fourth quarter may prove to be the period when results bottomed out.”

In sales by distribution channel, Jackson National was the new leader among independent broker-dealers, and Nationwide took the lead in wirehouses. The other distribution channel leaders were unchanged. Western National was the dominant bank channel carrier. New York Life led in captive agent and large/regional broker-dealer sales. USAA was the direct/third party channel leader. Allianz posted top independent producer sales.

Based in Evanston, Ill., Beacon Research tracks fixed, indexed and variable annuity sales, rates and features, and provides web-based systems for distributors and insurance companies.

Read more about Beacon’s annuities research at AdvisorOne.

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