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Beacon: 4Q Fixed Annuities Sales Near $20B

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Fourth quarter 2009 fixed annuity sales in the United States reached an estimated $19.6 billion, according to new data from Beacon Research.

The fourth quarter numbers are down 43% from the same year earlier period and down 11% from third quarter 2009, says the Evanston, Ill. annuity sales tracker.

Book value annuities took the sales lead for the quarter, producing an estimated $9 billion, the researchers say. Indexed annuities came in second, at $6.9 billion. Market value-adjusted annuities followed, at $1.8 billion, and fixed income annuities (both immediate and deferred) were last, at $2 billion.

Those results trailed the near-record levels of fourth quarter 2008, says Beacon, with market value-adjusted annuities behind 76%. Book value annuities were off 47%. Income annuities were down 17%; and indexed annuities fell 4%.

Year-end results were also trailing, the research indicates. For calendar year 2009, total annuity sales fell 2% below 2008, to an estimated $104.3 billion, Beacon says.

By product line, book value annuities produced $52 billion for the year, down 3% from 2008. Market value adjusted annuities produced $14.8 billion, down 16%. Fixed income products produced $8 billion, down 7%.

However, indexed annuities were the anomaly: They grew by 11% to $29.5 billion.

Sequentially, fourth quarter income annuities posted a small 1% increase in estimated sales over third quarter, Beacon reports. But market-value adjusted annuities were off 39% from the third quarter; book value annuities were off 9%. And indexed annuities fell 6%.

In terms of market share, indexed annuity sales reached an eight-quarter high of 35% in fourth quarter, the researchers point out. But book value annuities led the quarter with a market share of 46%.

According to Beacon, the top three fixed annuity sales leaders in fourth quarter were: Western National, at nearly $2 billion; New York Life, at nearly $1.8 billion; and Allianz Life, at nearly $1.6 billion.

“We expect first quarter sales to post a sequential increase,” says Jeremy Alexander, chief executive officer of Beacon. “Fixed annuity credited interest rates are somewhat higher than fourth quarter and promotional activity for all four fixed annuity product types has stepped up, he notes.

In addition, Alexander predicts that consumer demand should remain strong. However, he says, “further growth will depend on the interest rate environment and the availability of investment grade bonds to back new business.”