The growth in index annuity sales is getting some new wind. This comes from news about the returns that investors from the late 1990s have earned in their products, as of the third quarter of 2003.
Example: The average index annuity total return for products purchased on Sept. 30, 1998, and reaching the end of their initial index period on Sept. 30, 2003, was 30.4%.
The lowest returns for the same period were 15.93% for annuities using a term-end point crediting structure.
The highest return was 46.74% for an annuity using an annual reset crediting method and daily averaging.
Although some annuities had higher total returns than others, the focus increasingly is on the overall success of the index annuity concept, not individual results.
The investors who stayed in the product during that period have come out ahead.
Lets compare those figures against the broader landscape.
On Sept. 30, 1998, the S&P 500 closed at 1017.01. Five years later, on Sept. 30, 2003, the S&P 500 closed at 995.97. Although the September 2003 value was 28% higher than the nadir reached in the previous year, the index was still 2% below where it had been five years before.
And index annuities? They performed competitively in spite of enduring the worst bear market since the Depression.
Five years ago, there were 15 carriers offering index annuities that today have completed their index period and posted five years of interest crediting. Thirteen of these provided me with copies of 2003 customer statements (with personal data blacked out), or similar documentation, for a customer who had purchased the index annuity as close to Sept. 30, 1998, as possible.
These are the results I used to compare the total index annuity return with various other vehicles for the same period.