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1Q Equity Index Annuity Sales Were Flat

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Equity index annuities didnt ride the waves in the first quarter of sales for 2001, but neither did they slide down the valley.

According to a new report out from The Advantage Group, a Maryland Heights, Mo., EIA tracking service, EIA sales for the first quarter were flat, coming in at nearly $1.258 billion, about the same as in the fourth quarter of 2000.

Average EIA premium for the period was $33,116, about the same as the $33,452 reported by the participating companies for traditional fixed annuity average premium, adds Jack Marrion, Advantage Group owner.

Compared to the first quarter of last year, when EIA sales hit $1.5 billion, this years first quarter EIA sales were down 16.1%, the report notes.

Marrion believes the first quarter EIA sales were impacted by that quarters volatile stock market and also by the higher interest rates that traditional fixed annuities were offering, making FAs more attractive than in several past quarters.

The top EIA seller for the first quarter was Allianz/LifeUSA, which reported a little over $236 million in EIA sales. According to Marrion, this gave the company an 18.76% market share for the period.

Other top sellers, in descending order, were: Midland National, with over $172 million; American Equity, with nearly $152 million; Jackson National, with over $108.5 million; and Conseco, with over $84 million.

The top three companies represent a market share of 44.5% for the period, says Advantage Group, while the top five represent nearly a 60% market share.

The survey reported results from 45 EIA providers. Five of these did not participate and therefore are shown only with estimated results.

In all, Marrion says, 90% of the active EIA companies participated. “They represent 97% of total sales,” he says.

During the quarter, he says two insurers–American General and GE Capital–left the EIA market. But a new player–Oxford Life–entered (it reported first quarter sales of $700,000, Advantage Group says).

Throughout the three-month period, there were few new product introductions, Marrion notes.

Among existing products, the type of interest crediting methodology varied widely. “We can identify 42 crediting variations” for the quarter, says Marrion.

In the same period, EIAs with a surrender period of 10 years or longer represented over 76% of first quarter sales, compared to 64% for the same period last year, he adds. And “there were more sales of annuities with surrender periods of 12 years or longer than annuities with surrender periods of less than 10 years combined.”

As for EIA sales by distribution channel, Marrion notes that sales through financial institutions are slightly higher than they were a year ago–2.7% as compared to 1.9% in the first quarter of 2000–while agency sales are a little lower–92.5% compared to 94.1%. Broker/dealer and career agency sales did not change much.

Today, 10 carriers offer EIAs that include bond indices or equity indices beyond the S&P 500, the report says, adding that the S&P 500 index represents 96% of industry sales.

Commissions for 44 of the companies ranged from 5% to 11%. In the first quarter of 2001, the dominant range–representing 43% of the sales–was in the 9% to 10% range.

By comparison, in the previous two quarters, says Marrion, products paying a street agent commission of 11% or more were the ones that represented over 40% of sales. Now, the 11% and up group represents only 31% of sales.

However, one year ago, 42% of the EIAs sold had an agent commission of under 8%, while in the first quarter, policies paying these commissions represented only 25% of EIAs sold.

In other findings, the report relayed sales statistics for 13 insurers that offered equity index life insurance products in the first quarter. The top seller in this category was Conseco, reporting over $4.8 million in sales.

Total EIL sales were $13.5 million for the quarter, representing an 11% decline from the fourth quarter of 2000, says Marrion.

Reproduced from National Underwriter Life & Health/Financial Services Edition, June 11, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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