Evanston, IL, March 14, 2012—Despite a difficult interest rate environment, income annuity sales grew almost 18% in fourth quarter and nearly 7% in 2011, according to estimates from the Beacon Research Fixed Annuity Premium Study. This growth gave them a record-high 13% of fourth quarter’s sales. Indexed annuity results held their own, claiming a 48% share of the quarter’s sales – also a record high.
“Income annuities did remarkably well, considering that lower interest rates and a flatter yield curve reduced payouts,” said Jeremy Alexander, CEO of Beacon Research. “Income annuities generally provide the most retirement income bang for the buck. Sales results indicate that advisors and their clients are becoming aware of how these products can be used to create a personal pension. Similarly, guaranteed lifetime income benefits helped sustain indexed annuity sales despite lower cap or participation rates.”
Total annual fixed annuity sales were resilient during the difficult conditions of 2011, falling just 1.1% to $75.6 billion. Income annuity results advanced 6.6% to $8.5 billion. Indexed annuities did about the same at approximately $33 billion. Fixed rate non-MVA annuity sales of $28.1 billion and MVA sales of about $6 billion were down 3.1% and 5.5%, respectively.
Fourth quarter’s fixed annuity sales also held up surprisingly well on a period-to-period basis, declining only 1.7% to $17.3 billion. At $2.2 billion, income annuities were up 17.6%. Indexed annuity and fixed rate MVA results were essentially flat at $8.4 billion and $1.3 billion, respectively. Fixed rate non-MVA sales decreased 10.3% to $5.4 billion. Overall sales fell 8.8% from third quarter, with weaker results for all product types.
Estimated Sales by Product Type (in $ millions)
Three of fourth quarter’s top five companies changed position from the prior quarter. American Equity and Aviva moved up a notch to come in second and third, respectively. Western National moved to fourth place. Allianz and New York Life remained in first and fifth place, respectively. Fourth quarter results for the top five Study participants were as follows:
Total Fixed Annuity Sales (in thousands)
Allianz Life 1,491,418
American Equity 1,372,103
Aviva USA 1,233,303
Western National Life 1,118,218
New York Life 923,031
New York Life was the new MVA sales leader, and continued as the dominant income annuity issuer. The other top companies in sales by product type were unchanged from the prior quarter: indexed – Allianz, and fixed rate non-MVA – Western National.
In sales by distribution channel, Jackson National was the new leader among independent broker-dealers, and Nationwide took the lead in wirehouses. The other distribution channel leaders were unchanged. Western National was the dominant bank channel carrier. New York Life led in captive agent and large/regional broker-dealer sales. USAA was the direct/third party channel leader. Allianz posted top independent producer sales.
Fourth quarter’s top five products and their rankings were unchanged from the prior quarter. All were indexed annuities except for New York Life’s Lifetime Income Annuity, which remained in second place. The Study tracks the sales of some 600 fixed annuities, and the top five products were:
Rank Company Name Product Name Product Type
1 Allianz Life MasterDex X Indexed
2 New York Life NYL Lifetime Income Annuity Income
3 American Equity Retirement Gold Indexed
4 American Equity Bonus Gold Indexed
5 Aviva Balanced Allocation Annuity 12 Indexed
“As we expected, seasonality and the worsening interest rate environment drove a sequential drop in fourth quarter’s results,” Alexander concluded. “Fixed annuity sales typically fall to a certain level when the rate environment is unfavorable and remain there until rates and the yield curve improve. Fourth quarter may prove to be the period when results bottomed out.”
About the Beacon Research Fixed Annuity Premium Study
The quarterly Study is the first and only source to track and analyze product-level fixed annuity sales on an ongoing basis. Providing timely market intelligence of the highest quality, it’s designed to report what’s moving in each channel and why.
About Beacon Research
Beacon Research tracks fixed, indexed and variable annuity sales, rates and features, and provides web-based systems at www.annuitynexus.com for distributors and insurance companies. Beacon also licenses information and software tools to other platforms, including EbixExchange’s AnnuityNet annuity automation platform. Beacon's fixed annuity benchmark series -- the industry's first - is available through Ibbotson Associates. Directly and through strategic alliances, Beacon information can be accessed by hundreds of financial institutions and distributors.
Contact: Judith Alexander, 847.864.5447, [email protected]
 MVAs or market value adjustments pay a premium on withdrawals when interest rates fall and reduce withdrawals when rates rise. Fixed rate non-MVAs are also known as book value annuities.