NU Online News Service, April 15, 2005, 2:15 p.m. EDT
Bank sales of equity indexed annuities climbed to $259 million in the fourth quarter of 2004, from $93 million in the fourth quarter of 2003.[@@]
Thanks to increasing EIA demand, EIAs accounted for 3.9% of all bank fixed annuity sales in the fourth quarter, up from 1.2% of bank FA sales in the comparable quarter in 2003, according to Kenneth Kehrer Associates, Princeton, N.J.
The issuer of an EIA offers a minimum rate of return and also gives the purchaser a chance to earn a higher rate of return based on the performance of a stock index, such as the S&P 500. Sellers are billing EIAs as a good option for consumers who are willing to accept some, but not much, investment risk.
Traditional fixed annuity sales are struggling because of low interest rates, and variable annuities are struggling because many investors are wary about the stock market, says Alan Blank, president of Midwood Financial Services Inc., Encino, Calif., the company that sponsors the Kehrer EIA market survey.
“At the same time, variable annuities have come under intense regulatory scrutiny,” Blank says.
Meanwhile, EIA issuers have increased the appeal of their products by adding features such as shorter surrender penalty periods and options that can lock in gains on policy anniversaries, Blank says.