Third quarter 2003 index annuity sales were off by 13% from the 2nd quarter 2003, and by 13% from the 3rd quarter a year ago, reports The Advantage Group, St Louis.
Nonetheless, sales for the year are strong, says Jack Marrion, president of the research firm. For 2003s first 3 quarters, he says, index annuity sales reached nearly $10.2 billion, not far off total sales for all of 2002, which were a record $11.7 billion.
“Well have another record year in 2004,” Marrion predicts.
The figures are based on sales of 31 index annuity insurers. The results for 2 of the 31 are estimated.
The figures represent 97% of the active index product companies, accounting for over 99% of sales, according to Marrion.
Ranked by sales, the top 5 companies in the 3rd quarter were, in descending order, Allianz, AmerUs Group, American Equity, National Western and Midland National. These companies represent 62% of the total index annuity market share, according to The Advantage Group.
Allianz, AmerUs and American Equity held the top 3 slots in all 3 quarters of 2003, says the index annuity tracking service. In the 3rd quarter, their combined market share was 52%.
The 3rd quarter 2003 sales came to nearly $3.2 billion, trailing the record-breaking 2nd quarter of $3.7 billion.
What accounts for the falloff? In the early part of the 3rd quarter, most of the carriers were pulling older products from the market, suggests Marrion. These were index annuities that had minimum interest guarantees of 3%–a figure widely considered to be too high in todays low interest rate environment.
Most companies did replace these products with lower minimum guarantee products, Marrion says, but the transition happened gradually. That means, for a time in the 3rd quarter, the number of competitive index products available for sale was limited, he says.
That cut into sales. So did efforts of some carriers who, to deter sales of their higher minimum guarantee products, priced those products at unattractive levels, he says.
In addition, in the 3rd quarter, some producers began increasing the amount of sales they were doing in traditional fixed annuities, says Marrion.