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Index Annuity Sales Hit New Quarterly Record Of $3.3 Billion

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Index annuity sales hit another quarterly record in the 3rd quarter, according to The Advantage Group, a St. Louis, Mo., index annuity tracking service.

Total sales for the quarter came to over $3.3 billion, up 109% from the $1.6 billion reported for index annuity sales in the 3rd quarter of 2001, says Advantage Group owner Jack Marrion in his new Advantage Index Product 3rd Quarter 2002 Sales Report.

Compared to 2nd quarter 2002 sales, the 3rd quarter sales are up 21%, says Marrion.

Over 55% of the 3rd quarter sales came from index annuities that credit bonus interest, the report says. This percentage was up from nearly 44% of index annuity sales that went into bonus products in the 2nd quarter of 2002, and over 40% that went into bonused products in the 1st quarter, according to the report.

Ranked by commissions, the 3rd quarter sales saw 47% of the business going into index annuities that pay agents a street level commission of 11% or more. This is up from 38% of sales that paid street level commissions of 11% or more in the 3rd quarter of 2001, says the report. These figures reflect commissions paid by 28 carriers representing 99% of first quarter sales, Marrion says.

The average commission paid to agents on index annuity sales in the 3rd quarter came to 10.44%, Marrion says. Also, “the average weighted commission paid by carriers ranged from 2.29% to 14.69% of premium.”

Ranked by surrender period, over 70% of 3rd quarter index annuity sales went into products having surrender periods of 10 or more years. By comparison, in the 3rd quarter of 2001, just 60% of index annuity sales went into products with surrender periods of 10 or more years.

The 3rd quarter numbers reflect an estimated 99% of total index annuity sales, says Marrion. The survey covers the 33 index annuity insurers currently in the market, but results for two of the 33 insurers are estimated, he says.

The top seller in the 3rd quarter was Allianz Life, which the report says produced over $981.6 million in index annuity sales and gave the company a 29.5% market share. In 2nd place was Midland National Life, with $737.5 million. Third place went to American Equity, with nearly $407.7 million.

These same three companies held the same market positions in the 1st and 2nd quarters of 2002, says The Advantage Group report.

According to Marrion, the three sales leaders accounted for nearly 64% of market share in the 3rd quarter.

Segmented by distribution channel, the 3rd quarter sales were generated primarily by insurance agencies, accounting for 96.8% of the sales, says the report. By comparison, banks pulled in 1.6%, broker-dealers pulled in 0.5%, and career shops pulled in 1.1%. These percentages reflect sales from 80% of the responding companies.

The large majority (95%) of 3rd quarter sales went into index annuities that key their credited interest rates to the Standard & Poors 500 index. But the report notes that 10 insurers in the market now offer bond or equity indices beyond the S&P 500.

All carriers indicating they offer fixed account options in their index annuities reported they had seen “significant increase” in the amount of premiums directed toward the fixed accounts in the 3rd quarter, points out Marrion. On average, he says, “the percentage of premium allocated to the fixed options was roughly double that of a year ago.”

However, he says, “roughly half of the premium was still being placed in index choices.”

Reproduced from National Underwriter Life & Health/Financial Services Edition, December 30, 2002. Copyright 2002 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.