(Bloomberg) — Sales of indexed annuities surged 23 percent last year, prompting banks including JPMorgan Chase & Co. to expand into the booming structured-product market.
Symetra Financial Corp. began marketing annuities whose returns are derived from JPMorgan’s ETF Efficiente 5 Index on Tuesday, according to Diana McSweeney, a Symetra spokeswoman. The index, which targets a low volatility level by rebalancing monthly between cash and 12 exchange-traded funds that track a variety of assets from gold to high-yield bonds, is already used in structured notes and market-linked CDs.
The New York-based lender joins banks including Barclays Plc and Goldman Sachs Group Inc., that have partnered with companies in the indexed-annuity market, where sales reached a record $48.2 billion in 2014, according to data released by the Limra Secure Retirement Institute last week. That’s a $9 billion increase from the prior year, in part due to the rise of specialized indexes.
Many indexed annuities are “offering an uncapped feature, which is obviously a nice selling point,” said Todd Geising, senior business analyst for the annuity market at LIMRA. About a dozen specialized indexes were introduced in 2014, he said.
In the third quarter, 27.7 percent of indexed-annuity sales were tied to such so-called hybrid indexes, according to Wink’s Sales & Market Report. That’s helped reshape the indexed-annuity market, which has traditionally offered products whose returns are based on benchmarks like the Standard & Poor’s 500 Index.