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.”
The AnnuitySpecs report highlights fourth quarter 2009 results, too. Here are some key findings:
–Indexed annuity sales totaled $7 billion in the fourth quarter, down nearly 7% from the third quarter, and down less than 3% from the same period last year.
–Nearly 37% of fourth quarter indexed annuity premium deposits went into to fixed accounts, up from nearly 31% in fourth quarter last year. The remaining 62% went into several other crediting methodologies, but none of these attracted more than 25% of the total.
–Of 45 companies surveyed, the top 10 represented a combined 80% market share.
–Bank market share nearly doubled, to 8% in fourth quarter 2009, from slightly over 4% in the same period a year ago.
–Sales of products with long surrender charge periods (over 10 years) dropped by nearly 5% in fourth quarter compared to the same year earlier period, while sales of indexed annuities having surrender periods of 6 years and under increased nearly 5%.
–Average indexed annuity commission was 6.8% in the fourth quarter, down from over 7.6% in fourth quarter 2008.
–Average sales premium in fourth quarter 2009 hit a record high of $62,387, up nearly 9% from third quarter’s $57,473. The sales average has been trending up for at least a year; in fourth quarter 2008, the average sales premium was $54,068.
–Sales of indexed annuities offering bonuses rose by nearly 7% over the previous quarter. “This shows that consumers were trying to move into products that can help them make up for losses suffered in the stock market,” Moore says. This has happened even though some bonuses were only 1% to 3%, she adds.