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Why fixed indexed annuity sales continue to grow

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The “Great Recession,” followed by a sustained low-interest rate environment, are just a couple of factors that have contributed to a fairly tumultuous period in the life insurance industry over the past half-decade. One bright spot within the industry, however, has been the continued robust growth of fixed indexed annuity (FIA) sales.

First introduced in the mid-1990s, fixed indexed annuities are a relatively new product line by industry standards. However, 2014 sales reached nearly $47 billion, representing the sixth consecutive record year for sales, according to Wink, Inc., an annuities and life insurance consulting firm. And sales don’t show signs of slowing down either. First-quarter sales this year topped $11 billion, greater than any other first quarter in the history of the product line, according to “Wink’s Sales & Market Report.”

While sales figures have been nothing short of impressive, intuitively, the product’s widespread popularity makes a lot of sense. For investors worried about market volatility, fixed indexed annuities offer a modest guaranteed minimum return, along with the potential to earn additional interest when the market increases. With a seemingly infinite variety of features and index options, financial sales professionals are not suffering from a lack of choice when making product recommendations to their clients.

To better understand the experiences and challenges of advisors when selling this timely product, National Underwriter Life & Health conducted a comprehensive survey of financial sales professionals actively selling annuities. Athene sponsored the research study. The purpose of the project was to understand the expectations and needs of advisors, the types of  clients they sell FIAs to, their optimism about their own product sales, areas where they feel they would benefit from additional training, and much more. The results of the study have been illuminating.

As noted in the methodology, qualified survey respondents must have sold at least one annuity of any type in the past 12 months. Most have sold many more, however. The average new annuity premium written in the past year is $983,000. Respondents who have been in the business for at least 20 years wrote more than $1.1 million on new annuity premium last year. When it comes to FIA sales specifically, seven in 10 advisors surveyed have sold at least one FIA in the past year. In fact, FIAs are by far the most popular type of annuity sold by respondents, accounting for 53 percent of total personal annuity sales (Figure 1).

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Methodology

National Underwriter Life & Health conducted the Fixed Indexed Annuity Study in May 2015, randomly surveying financial professionals from ALM’s proprietary databases. In total, 543 usable responses were collected online, representing a confidence interval of +/- 4.1 percent. Respondents were screened to ensure that each has: 1. Worked as an investment or insurance professional for at least one year; and 2. Has sold at least one annuity in the past 12 months.

Note: For the purposes of this study, the financial sales professionals who responded to the survey are referred to as “advisors.”

Check back for our next installment, when we’ll address the health of the FIA market.