Index Annuity Sales In 1st Quarter Were $3.2 Billion
Index annuity sales in the first quarter of 2003 totaled $3.29 billion, reports The Advantage Group, a St. Louis, Mo., index annuity tracking service.
“This is down slightly–by 4%–from fourth quarter 2002, when total sales hit a quarterly record of slightly over $3.4 billion,” says Jack Marrion, Advantage Group president.
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However, the fourth quarter number was up substantially–by 52%–over the same period a year earlier, he says. In the first quarter 2002, total sales were $2.168 billion.
First quarter 2003 results reflect index annuity sales at 30 insurers currently active in the market. Marrion estimates these companies represent 97% of all active index product companies and 98% of total sales for the period. (Note: Results were estimated for one carrier that did not participate in the survey.)
Most index annuities are fixed annuity contracts that link their internal excess interest growth to performance of one or more financial indexes, such as the S&P 500. A few are registered products.
Some index annuities also include a fixed interest account, says Marrion. The fixed accounts have been popular in recent quarters, but this has begun to change, he says.
In first quarter 2003, for example, the fixed account buckets drew just one-third of total index annuity premium deposits, Marrion says. By contrast, in fourth quarter 2002, these accounts drew about 40% of total premium deposits, and in third quarter 2002, they attracted nearly 45% of total deposits.
Marrion sees the decrease in fixed interest deposits as a “good sign,” indicating that more new buyers want exposure to the equity linking that index annuities make possible.
If that is so, why did sales take a dip from the previous quarter? Marrion suggests one reason might be that the index annuity story may be a little harder to tell this year than last, due to the prolonged volatility in the stock market and continuing low interest rate environment.