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Fixed Annuity Sales Fall: Beacon

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U.S. sales of fixed annuities fell in the first quarter when compared both with the previous quarter and the comparable quarter in 2009, according to Beacon Research.

Beacon, Evanston, Ill., says total fixed annuity premium sales dropped by 15% from the fourth quarter of 2009 and by 52% from the first quarter of 2009.

Total sales in the latest quarter amounted to about $16.7 billion, according to Beacon, an annuity tracking firm.

Book value annuities took the sales lead for the quarter, with premiums at $6.8 billion, the firm says. Indexed annuities came in second, at $6.7 billion, followed by fixed income annuities at $1.8 billion and market value-adjusted annuities at $1.3 billion.

Results for all four annuity product types were behind results for both the prior quarter and for the first quarter of 2009, the firm says. Relative to the previous quarter, MVA sales dropped 25% and book value annuity sales dropped 24%. Income annuity sales were down 7%, and indexed annuity sales fell 2%.

Compared to a year ago, when fixed annuity sales hit a record high, the results from the latest quarter were all down, according to Beacon. Book value annuity sales fell 64%; MVAs fell 80%; income annuities fell 6%; and indexed annuities fell 5%.

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.


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