EVANSTON, Ill., March 1, 2007 (PRIME NEWSWIRE) -- U.S. sales of fixed annuities fell to an estimated $16.5 billion in fourth quarter, 2006, a decrease of 15.7% from the previous quarter (1) and 1.1% from fourth quarter, 2005. On a calendar year basis, estimated sales of $70.9 billion were 3.3% below 2005, according to new data from the Beacon Research Fixed Annuity Premium Study based on sales of 48 insurance companies. By product type, estimated annual sales in 2006 were: book value (2) -- $30.2 billion, indexed -- $25 billion, market value-adjusted (MVA) -- $9.6 billion, and immediate -- $6.1 billion. These estimates reflect declines in all product types except MVA annuities, which grew 71.3%. However, estimated sales of these products decreased 21.7% from the prior quarter.
MasterDex, an indexed annuity issued by Allianz Life Insurance Company of North America (3), was the quarter's top-selling product in the Study for the tenth consecutive quarter. New York Life's Preferred Fixed Annuity, a book value product, took the number two spot. This product moved up from number three in third quarter, and was among the top five for 12 quarters straight. Flex 5 & 7, a book value annuity issued by AIG Annuity Insurance Company (NYSE:AIG), replaced it as the quarter's third bestseller. Allstate Financial's (NYSE:ALL) Preferred Performance, a book value product, took fourth place. Secure Index Opportunities Plus, an indexed annuity issued by ING USA (NYSE:ING), came in fifth. Fourth quarter results include sales of some 226 products.
Rank Company Name Product Name Product Type
1 Allianz MasterDex Indexed
2 New York Life Preferred Fixed Annuity Book Value
3 AIG Annuity Flex 5 & 7 Book Value
4 Allstate Financial Preferred Performance Book Value
5 ING USA Secure Index Indexed
Opportunities Plus
Of these top five products, three also led sales in a distribution channel: The Allianz MasterDex continued to be the top product among independent producers. New York Life's Preferred Fixed Annuity was again the best seller among captive agents. In banks and S&Ls, AIG Annuity's Flex 5 & 7 was the sales leader. GPA Plus, a book value product issued by John Hancock (TOR:MFC.TO), retained its number one status in the independent broker-dealer channel (4). Among large/regional broker-dealers, the top product was Lincoln Financial Group's (NYSE:LNC) Lincoln Select, a book value product. MetLife's (NYSE:MET) Fixed Annuity FA led wirehouse sales. (5)
Channel Company Product Product Type
Banks and S&Ls AIG Annuity Flex 5 & 7 Book Value
Captive Agents New York Life Preferred Fixed Book Value
Annuity
Independent
Producers Allianz MasterDex Indexed
Independent Broker-
Dealers John Hancock GPA Plus Book Value
Large/Regional
Broker-Dealers Lincoln Financial Lincoln Select Book Value
Group
Wirehouses MetLife Fixed Annuity FA MVA
By product type, New York Life had the leading immediate annuity for the third consecutive quarter.
Reversing a 12-month trend, there was a move toward shorter rate terms in fourth quarter, 2006. The one-year interest guarantee period (IGP) increased its dominance in book value products, accounting for 69.4% of sales (up from 66.2% in third quarter). There also was a significant shift toward shorter MVA rate terms, with IGPs of less than five years accounting for 56.9% of sales (up from 38.5%).
"Although Treasury rates continued to fall in fourth quarter, fixed annuity buyers and their advisors apparently felt that rates had bottomed out and went short," said Jeremy Alexander, CEO of Beacon Research. "This helps explain the quarter-to-quarter drop in sales of MVA annuities, which tend to have longer rate terms. In fourth quarter and throughout 2006, fixed annuities generally had a hard time competing with bank certificates of deposit as well as variable annuities with guarantees and other equity-based investments. However, sales of fixed immediate annuities grew in each quarter of 2006. This suggests that older Baby Boomers are increasingly using these products to provide retirement income that cannot be outlived, even though lower interest rates are reducing payouts."
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. The rapid growth in Study participation is testimony to the need for this information.
About Beacon Research
Beacon Research is an independent research organization founded in 1997. It compiles market intelligence on fixed annuity products for subscribers to its web-based systems at www.annuitynexus.com. Carriers access these systems to support product development, rate setting and competition research. Distributors use them for product analysis and selection. The AnnuityNexus Sales Support System is an important resource for retention teams and sales desk staff throughout the distribution chain. Beacon also licenses information and software tools to other platforms, including websites for sales representatives and Finetre'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.
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(1) Estimated sales for third quarter, 2006 have been revised downward
from $19.9 billion to $19.6 billion.
(2) Book value fixed annuities pay a declared rate of interest for a
specified period. A market value adjustment (MVA) is not imposed
if the holder withdraws assets before the end of the contract
term. MVA products also pay a declared rate of interest for a
specified period, and do impose such an adjustment.
(3) Allianz Life Insurance Company of North America is a subsidiary of
Allianz AG (NYSE:AZ).
(4) GPA Plus has been the Study's leading independent broker-dealer
product since second quarter, 2005. Due to a distribution channel
redefinition, John Hancock's independent broker-dealer sales include
revenue formerly reported as captive agent channel sales.
(5) Number of products for which sales were reported per channel:
Banks and S&Ls -- 81; Captive Agents -- 117; Independent Producers
-- 136; Independent Broker-Dealers -- 45; Large/Regional
Broker-Dealers -- 46; Wirehouses -- 26.