Fixed Index Annuity Sales Hit New Record Of $11.7 Billion in 2002

Fixed Index Annuity Sales Hit New Record Of $11.7 Billion In 2002

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Fixed index annuities continued on their record-setting sales track, producing $11.67 billion in sales in 2002, up 80% over 2001 results, according to The Advantage Group, a St. Louis, Mo., index annuity tracking service.

Sales of these products grew steadily in 2002, with each quarter hitting yet another sales record, says Jack Marrion, president of The Advantage Group. (See Chart 1.)

Fixed index annuities offer a minimum interest rate guarantee plus an opportunity to earn more via excess interest credits that are linked to gains in an equity, bond or other financial index. The policies are designed to appeal to buyers who are looking for a “safe” place to put some of their assets, but with the prospect of upside potential.

In the fourth quarter, total fixed index annuity sales reached a quarterly record of slightly over $3.4 billion, Marrion notes. Thats up only 3% over the third quarter sales, he says, but it is also up 68% from fourth quarter 2001 sales of over $2 billion.

The 2002 results were based on results of 32 fixed index annuity providers. Two of the providers did not participate in the survey so their results were estimated, says Marrion.

The 30 companies that did participate in the survey represent roughly 94% of the active index product companies, he says, adding that these companies produced about 99% of total sales industrywide in 2002. The survey was conducted in January and February of 2003.

According to the figures, the lead company in 2002, when ranked by sales, was Allianz Life. It produced over $3.4 billion in total fixed index annuity sales for the year, says Marrion. Midland National, American Equity, North American, and AmerUsGroup came in second, third, fourth and fifth, respectively (see Chart 2).

In the fourth quarter, a few insurers pulled index annuities from the market, Marrion notes. However, he believes the providers will introduce newer designs later this year. He expects these new designs will have shorter surrender charge periods and lower commissions than previously.