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September 10, 2006 at 04:00 PM
Fixed index annuity sales were flat in the 2nd quarter of 2006 compared to the 1st quarter, according to a new report from Advantage Compendium, St.Louis, Mo.
When compared with the 2nd quarter in 2005, the sales were actually off by 14%.
Sales reached over $6.3 billion in each of the first two quarters of this year, the report indicates. By comparison, in the 2nd quarter of 2005, they were at $7.4 billion.
When comparing first half results, sales reached over $12.7 billion in 2006, down 8% from the first half of 2005, when the total was $13.8 billion.
Two key factors account for the flattening results, says Jack Marrion, president of Advantage Compendium.
One is the continuing negative publicity about index annuities stemming from the National Association of Securities Dealers’ Notice to Members 05-50, issued in August last year. That notice detailed NASD’s concerns about marketing, supervision, disclosure and investor protection issues that registered broker-dealer firms may confront when selling non-registered index annuities.
The notice has put a drag on sales, Marrion says.
The sales report shows a related finding, he says. It shows that broker-dealers accounted for only 0.8% of 2nd quarter index annuity sales–down 66% from the 2.4% market share that they had in the 2nd quarter a year earlier.
Given that index annuity sales in the B-D channel had previously been increasing incrementally, “that is a significant decline,” says Marrion. He says it is further indication that Notice 05-50 is having a negative effect on fixed index annuity sales–i.e., fewer broker-dealers are selling the product.
The other factor impacting 2nd quarter fixed index annuity sales is the general interest rate environment, says Marrion. “With pure interest rates at 5% or better, some consumers are deciding to put their money in bank certificates of deposit rather than in annuities.”
