Indexed annuity sales hit a new sales record in 2009, reaching over $30.1 billion, according to AnnuitySpecs.com, Pleasant Hill, Iowa. That’s up nearly 13% over 2008 when sales totaled nearly $26.8 billion, the research firm says in its new Indexed Sales & Market Report.
“It is truly impressive that the industry had the best year ever at a most difficult time for companies and the economy,” says AnnuitySpecs President Sheryl Moore.
Not only was the year a record for indexed annuity sales, but so was the second quarter, which produced a quarterly record of over $8.3 billion in sales, she says. “In addition, third quarter 2009 was the second highest quarter ever, producing $7.6 billion in sales.”
The results are all the more remarkable, Moore says, “because indexed annuity companies had to change their products and strategies in order to adjust for capital constraints and market conditions.”
The changes were widespread. For instance, she says, “some insurers exited the indexed annuity market altogether. Others pulled from the market their more competitive products–including policies offering 10% bonus interest rates and products offering guaranteed living withdrawal benefits–or they put moratoriums on sales of those products. Some put moratoriums on all 1035 exchanges.
“Some laid off agents or cancelled agent contracts, forcing the agents to seek new contracts. At least four stopped making all-new agent appointments,” Moore says.
“Some made commission changes, too. For instance, three insurers dropped their commissions as sales shifted to fewer sales of indexed annuities having long surrender charge periods (over 10 years),” Moore explains.
As the year unfolded, sales moved increasingly towards products with shorter surrender charge periods of 10 years or less, according to Moore.
In banks, for instance, sales focused on six-year products that pay only 3.5% commission. “Despite that, total bank sales of indexed annuities were up,” Moore says.
“All in all, it was an amazing story,” she concludes. “Even though commissions to agents were moving down, sales were going up. The agents had to work harder to make their money.”