IRI and Beacon Research: Second-Quarter US Sales of Fixed Annuities Up 41.6%
September 22, 2014 by Fran Matso Lysiak
WASHINGTON – Second-quarter 2014 total sales of fixed annuities in the United States grew to $24.3 billion, a 41.6% gain from the same period a year ago, supported by sales of indexed annuities, according to the Insured Retirement Institute and Beacon Research.
By company, Allianz Life Insurance Company of North America, a unit of Germany’s Allianz SE, again captured first place, with sales of $3.8 billion, according to Beacon, which partners with IRI on the data. With sales of $1.6 billion, New York Life again took second place.
Taking third was Security Benefit Life Insurance, whose parent company is private equity firm Guggenheim, with sales of nearly $1.4 billion. Coming in at No. 4 was Forethought Life, whose parent is Bermuda-based Global Atlantic Financial Group, with sales of $1.2 billion. Global Atlantic separated from Goldman Sachs in April 2013.
In January, Global Atlantic completed its acquisition of Forethought Life Insurance Co. Forethought Life has a growing presence in the senior market through its niche pre-need life insurance and retirement based fixed indexed annuities as well as a new variable annuity product offering, according to A.M. Best Co. (Best’s News Service, Jan. 8, 2014)
Rounding out the top five was American Equity Investment Life, part of American Equity Investment Life Holding Co., with second-quarter sales of more than $1 billion, according to Beacon.
“Despite declining interest rates during the first six months of this year, fixed annuity sales continue to drive overall annuity sales growth,” Todd Giesing, senior analyst for Limra’s Secure Retirement Institute Annuity Research, said in a statement. Limra separately reports annuity sales data.
Amid persistent low interest rates in the United States over the past few years, the life insurance industry has had a tougher time earning a profit on many of its traditional insurance products, including fixed annuities. It looks like record low rates are likely to continue for awhile.
However, last week the Federal Reserve announced that it’s reducing the monetary stimulus it’s pumping into the economy by $10 billion with the continued “tapering” of its bond-buying program.
Last year was the first that annual sales of fixed annuities were up year-over-year since 2008. Total sales of these retirement savings and income products increased to $78.1 billion in 2013, up 16.6% from 2012, which represented the fourth-straight year of annual sales declines.
However, with indexed annuities, a type of fixed, the insurer invests most of the customer’s principal in bonds to ensure the policy will generate a small annual return but uses a small portion of the premium to buy options in a stock market index, usually the S&P 500. Options that are exercised can result in additional interest credited to a policy, potentially more than an investor might achieve through other fixed-income investments.
“We are enjoying a prolonged resurgence of fixed annuity sales of all types, with sales up $7.1 billion – or 42% – since the second quarter of 2013,” Jeremy Alexander, president and chief executive officer of Beacon Research, said in a statement.
In addition, for the first time on a year-to-date basis, broker-dealer market share – 16.6% – surpassed captive agent market share, at 11.5%, Alexander said.
Allianz Life Insurance Company of North America currently as a Best Financial Strength Rating of A (Excellent)
