The American Annuity Shuffle Begins

By Linda Koco
AnnuityNews

Year-end individual annuity sales results provide plenty for annuity aficionados to ponder. There were some sorry-looking numbers, for sure, but also some intriguing surprises. Some would say the carriers were doing a dance, or at least a shuffle.

As for the sorry numbers, LIMRA’s latest report shows that variable and fixed annuity sales combined were off by about 8.6 percent compared to 2011. Specifically, industrywide combined sales fell to $219.7 billion from $240.3 billion, according to the research firm.

Even the top 20 were off, swooning by roughly 8.5 percent on sales of $174.3 billion versus $190.5 billion in 2011.

As may be expected, the two lines were off too: Variable annuities sold $147.4 billion industrywide in 2012, down by 7.5 percent from $159.3 billion in 2011, and fixed annuities sold $72.3 billion, down by about 10.8 percent from $81 billion last in 2011.

Want more punishment? AnnuitySpecs.com announced, in the very same week, that fourth quarter indexed annuity sales were $8.4 billion—down by 3 percent from the previous quarter.

That’s not all

As the saying goes, that’s not all she wrote.

When compared with the same period last year, indexed annuity sales were actually up by 2 percent, said Sheryl J. Moore, president and chief executive officer  of Moore Market Intelligence, the firm that owns AnnuitySpecs.com. In addition, at nearly $34 billion total, the year 2012 was the fifth consecutive record-setting year for indexed annuity sales. That tops last year’s record by nearly 5 percent, Moore says.

“When you consider that record-low indexed annuity caps and rates have persisted, it’s hard to ignore that these sales records provide compelling evidence of consumers’ demand for retirement accumulation products with principal protection features,” Moore said in a statement.

Far from voicing discouragement at the 2012 numbers, Moore is upbeat. “If such low interest rates persist, I project that indexed annuity sales will exceed fixed annuity sales by 2015,” she said.

What about the LIMRA results? The numbers may be down, but the picture of the industry is an eye-opener. That’s because there are changes winking through the data that suggest industry re-configuration of power players is going on.

For example, Jackson National Life jumped to first place as the top annuity seller in 2012, industrywide. Last year, it was in third place and so too the year before. But in each year, it sold more than the previous one. For instance, in 2012, according to LIMRA estimates, it sold $22.4 billion, up from nearly 19.8 billion in 2011 and from $17.6 billion in 2010.

Jackson also moved up the LIMRA leaderboard of variable annuity sellers. It came in second place in 2012 just behind top ranked Prudential Annuities, and with not much air between them.  Prudential’s variable annuity sales came to nearly $20 billion, and Jackson’s came to $19.7 billion.

An interesting wrinkle in this is that, when MetLife was in first place for combined sales in 2011, it was also in first place in variable sales. The same was true for Prudential in 2010—first in combined and first in variable. But Jackson’s rankings break the pattern: It is first in combined sales but second in variable.

Jackson’s journey

Jackson’s 2012 top ranking for all annuity industry sales happened despite its controversial announcement last fall that it was suspending new sales of certain variable annuities and pulling certain options.

Some producers in the independent broker-dealer community took the news hard. They had been placing quite a bit of business with the carrier, no doubt helping it make that move from third to first place industrywide, so the pullback stung. And they were not mollified by the fact that Jackson was still selling a more modest variable annuity, one more suited to current economic conditions. Some producers were so angry that they said they were going to take their business elsewhere.

Certain industry watchers wondered if that would be curtains for Jackson in the never-ending Battle for Shelf Space at the distributors. But they forgot to ask, were would these producers take their business? The No. 1 seller in 2011, MetLife, had announced mid-year that it was intentionally scaling back its variable annuity sales, and the industry’s No. 1 seller in 2010, Prudential Annuities, had earlier announced a suspension of its own. A number of other carriers were pulling on the reins, too, as coping with the fierce winds of prolonged low interest rates and continued market volatility became the uppermost concern.

Now, at year end, it looks as if whatever happened with all that anger  was not of sufficient magnitude to keep Jackson out of first place.

It’s worth noting that Jackson got there with the help of fixed annuity sales, where it ranked in seventh place on LIMRA’s list of top 20 fixed annuity sellers. Neither of the company’s two closest contenders, Prudential or MetLife, placed in LIMRA’s top 20 on the fixed side.

Other winks

The LIMRA data is winking in other ways too.  For instance, the top 20 list, with variable and fixed annuities combined, now includes Security Benefit Life in 16th place on sales of over $3.8 billion. Last year, it was not on that list at all, nor the year before. Most of this carrier’s production came from fixed annuity sales of about $3.5 billion—production that put it in fifth place on LIMRA’s fixed annuity top 20 list, up from 19th place in 2011.

(A lot of that production came from indexed annuity sales. In fact, according to AnnuitySpecs, Security Benefit Life took fourth place among indexed annuity sellers in 2012, on indexed sales of more than $2.9 billion.)

Meanwhile, MassMutual joined the combined list of variable and fixed annuity sellers in 2012, coming in 20th on sales of nearly $2.3 billion. It didn’t have a place on that list in the previous two years, so if it takes a bow, you’ll know why. This carrier’s fixed sales of nearly $1.5 billion is what helped put the company in the top 20 group.

The top 20 life of variable annuity sellers shows Guardian in 16th place, on sales of nearly $1.5 billion in 2012. That’s up from 20th place in 2011, on sales of $1.1 billion. On the same list, Northwestern Mutual ranked in 18th place in 2012 on sales of more than $1.4 billion. That’s up from 19th the year before. Neither of these carriers made the top 20 variable annuity list in 2010, so they’re gathering some steam.

On the top 20 list for fixed annuity sales, the lead carrier was Allianz Life, at nearly $5.5 billion. It returned to the top spot after being there in 2010. It also took 12th place in variable sales and eighth in combined. Allianz was also the top-ranked carrier in indexed annuity sales, on production of $5.4 billion for the year, according to AnnuitySpecs.

By the way, in 2011, Allianz took second in fixed sales when AIG’s fixed sales passed it by a hair. But this year, AIG dropped to sixth place in fixed annuity sales, seventh place for variable annuity sales and seventh place for combined variable and fixed sales.

There are a lot of switcheroos like that this year, as well as a few notable absences. These few should help paint the picture, though. The year 2012 just might be the year of the Great American Annuity Shuffle. Back home, or in the board room, the sales results won’t get a lot of oohs and ahs, but the repositioning of carriers probably will. Either that, or ouches.

Click here to view the chart showing 2012 annuity sales by carrier.

Linda Koco, MBA, is a contributing editor to AnnuityNews, specializing in life insurance, annuities and income planning. Linda can be reached at [email protected].

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Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda can be reached at [email protected].