Fixed Annuity Sales Fall: Beacon

Book value annuities remained the dominant product type in the first quarter, but their 41% market share was the lowest since the third quarter of 2007, the firm says. Meanwhile, indexed annuities’ share of sales hit a 12-quarter high of 40%.

The sales leader in the first quarter was New York Life Insurance Company, New York, with total fixed annuity production of more than $1.7 billion, according to Beacon. Filling out the top five were Allianz Life Insurance Company of North America, Golden Valley, Minn.; Aviva USA, Des Moines, Iowa; Western National Life Insurance Company (NYSE: AIG), Amarillo, Texas; and American Equity Investment Life Insurance Company (NYSE: AEL), Des Moines.

By product type, the sales leaders were: New York Life for book value sales, Allianz for indexed annuities, and Hartford for MVAs.

Although fixed annuity rates are down and that typically dampens sales, “we continue to expect growth for fixed annuities due to rising demand from baby boomers nearing and entering retirement,” says Jeremy Alexander, chief executive officer of Beacon Research.

In addition, he notes that the corporate bond yield spread over Treasury rates has widened, and that a widening of spreads “generally provides fixed annuities with a rate advantage that boosts results.” Fixed annuity sales may also benefit from the recent stock market volatility and the flight to safety, he says.