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Fixed Annuity 1Q Sales Up 3% Over Previous Quarter

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U.S. fixed annuities sales reached $17.3 billion in the first quarter of 2006, with March showing the highest sales, according to the latest Beacon Research Fixed Annuity Premium Study.

FA sales for the quarter were up 3% from the total for the previous quarter but 4% below the total for the comparable period in 2005, according to Beacon, Evanston, Ill.

The Beacon first-quarter survey includes data from 51 insurance companies for 196 products.

First-quarter indexed annuity sales were $7.2 billion, up almost 8% from the prior quarter and up 13.1% from the first quarter of 2005.

MasterDex, an indexed annuity from Allianz Life Insurance Company of North America, was the quarter’s top-selling product in the study. (See table.)

Two of the top five also led sales by distribution channel, with the Allianz MasterDex in the lead among independent producers and Allstate’s Preferred Performance in the lead in the bank channel. Among captive agents, the top seller was New York Life’s LifeStages Choice Fixed Annuity, a book value product.

The sales leader among independent broker-dealers was John Hancock’s GPA Plus, another book value product. (Note: Due to a distribution channel redefinition, Hancock’s independent B-D sales include revenue formerly reported as captive agent channel sales.) However, market value adjusted products continued to lead sales in the other B-D channels. MetLife’s Fixed Annuity FA came in first among large/regional B-Ds, and Allstate’s Choice Rate was tops among wirehouses.

By product type, Allstate’s Choice Rate was also the quarter’s best-selling MVA product. Genworth had the leading immediate annuity.

Treasury rates rose steadily in the first quarter. Rising rate environments tend to favor sales of one-year interest guarantee periods (IGPs) over longer IGPs. But the dominance of one-year IGPs continued the decline seen in the fourth quarter of 2005. The one-year IGP accounted for just 22.2% of MVA sales, down significantly from 38.7% in the fourth quarter of 2005. The decline was much less dramatic among book value products, from the fourth quarter’s 85.7% of sales to 83.2% in the first quarter of 2006.

“Fixed annuity sales tend to increase as interest rates rise, as was the case in first quarter,” said Jeremy Alexander, chief executive officer of Beacon Research. “We expect to see further improvement in fixed annuity sales this year. Rates have continued to rise since first quarter and, more important, the yield curve started to steepen at the end of March. A steeper yield curve will enable insurers to give fixed annuities a competitive rate advantage by investing in longer-term fixed income instruments to back annuities with shorter rate terms.”


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