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3rd Quarter Sales Of Fixed Annuities Soared 35% Over Last Year

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3rd Quarter Sales Of Fixed Annuities Soared 35% Over Last Year


Fixed annuity sales continued to surge in the 3rd quarter of 2001, according to a report just out from LIMRA International, Windsor, Conn.

Sales of the product rose by 35% in the 3rd quarter, compared to the same quarter last year, and by 25% year-to-date, says Eric T. Sondergeld, corporate vice president and director of LIMRAs Retirement Research Center.

Total fixed annuity sales for all three quarters reached $50.1 billion, he notes. “In the 3rd quarter alone, they hit $18.2 billion, the highest quarter ever for these products.”

This strong growth occurred despite the fact that average new money rates fell by nearly 1% in the past year, Sondergeld points out.

The continuing turbulence in the stock market was a key factor, he suggests. “Many people today see a lower positive return (in the fixed annuity product) as better than losing money in equities.”

Stock market turbulence may have also contributed to two other significant annuity sales trends:

“First, variable annuity sales for the first three quarters of this year fell by 20%, to $84.3 billion,” Sondergeld says. In fact, he says, VA sales have decreased for six consecutive quarters, when compared to previous quarters. (In the 3rd quarter of 2001, VA sales came to $26.5 billion.)

Second, overall annuity sales (including both VA and FA contracts) actually declined by 8% for the first three quarters of 2001, compared to the same period last year, in large part due to the VA sales decline, says Sondergeld.

But the stock market doldrums didnt hurt the entire variable annuity market. Sales of variable income annuities actually rose by 16%, to $800 million in the first three quarters of 2001, according to Sondergeld.

Other annuity payout products also saw strong sales: Structured settlement annuities increased by 45%, and fixed immediate annuities by 13%.

Why the jump in variable immediate annuity sales when deferred variable annuities are seeing a sales slowdown?

“One leading writer doubled its weekly sales after adding a new liquidity feature,” Sondergeld says. “Also, several insurers introduced new VIAs in the previous two years. This increased product availability is now being reflected in sales.”

On a broader level, variable immediate annuity sales have been growing over the past few years, rising from a three quarter total of $200 million in 1997 to four times that today, he notes.

He suspects this upturn reflects changed thinking. “Before, many people believed their invested assets would be there for them when they retire,” he explains. “But the recent stock market has shown that that might not necessarily be the case. So, now, some are looking at income annuities as a way to be sure their money will never run out, without losing growth opportunity.”

Fixed immediate annuities and annuitization of deferred annuities are attracting admirers, too, according to Sondergeld.

“Journalists from all kinds of publications have been calling me for interviews to learn more about income products. Its all very positive.

“Other industry people are getting calls, too,” Sondergeld says.

These trends suggest that the previous years of industry talk about income products is “starting to turn into action,” he says.

The LIMRA survey covered results of 56 companies, representing 88% of the variable annuity market and 75% of the fixed annuity market. It found that, in the first three quarters, sales through banks and independent agents increased by 17% and 15%, respectively, but decreased by 28% and 21%, respectively, through stockbrokers and career agents.

Reproduced from National Underwriter Life & Health/Financial Services Edition, December 17, 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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