EVANSTON, Ill., March 10, 2008 (PRIME NEWSWIRE) -- U.S. sales of fixed annuities were an estimated $17.4 billion in fourth quarter, 2007 according to new data from the Beacon Research Fixed Annuity Premium Study based on sales of 49 insurance companies representing an estimated 88% of the market(1). Overall sales were 4.1% above those of fourth quarter, 2006 but down 2.0% from the previous quarter. Estimated sales for calendar year 2007 were $65.1 billion, a decrease of 9.0% from 2006.
By product type, estimated sales in fourth quarter, 2007 were: book value(2) -- $6.9 billion; indexed -- $6.3 billion; market value-adjusted (MVA) -- $2.1 billion, and; immediate -- $2.1 billion. These estimates reflect increases from the prior quarter in all product types except MVA annuities. Relative to fourth quarter, 2006, sales of immediate annuities were up 27.6%. There also were increases in indexed and book value sales of 10.5% and 2.5%, respectively. MVAs dropped 20.1%.
Allianz reclaimed leadership in overall sales among Study participants. Fourth quarter results for the top ten Study participants were as follows:
Total Fixed Annuity Sales
(in thousands)
-------------------------
Allianz Life(3) 1,614,157
AIG Annuity Insurance Co. (NYSE:AIG) 1,367,185
New York Life 1,218,342
Aviva USA(4) 1,137,065
Principal Financial Group (NYSE:PFG) 900,397
Allstate Financial (NYSE:ALL) 878,057
Old Mutual Financial Network(5) 590,435
AEGON USA (NYSE:AEG) 566,305
American Equity Investment Life (NYSE:AEL) 533,897
Jackson National Life 519,582
Fourth quarter's five best-selling products were issued by the top four companies. Endurance, an indexed annuity from Allianz Life, moved to first from fourth place last quarter. Allianz' MasterDex, another indexed annuity, retained the number two spot(6). New York Life's Preferred Fixed Annuity, a book value product, came in third. Another book value annuity -- AIG Annuity's Flex 5 & 7 -- rejoined the top five in fourth place. Coming in fifth again was MultiChoice Income Plus, an indexed annuity issued by an Aviva USA company. Fourth quarter results include sales of some 260 products(7)
Rank Company Name Product Name Product Type 1 Allianz Life Endurance Indexed 2 Allianz Life MasterDex Indexed 3 New York Life Preferred Fixed Annuity Book Value 4 AIG Annuity Flex 5 & 7 Book Value 5 Aviva USA MultiChoice Income Plus Indexed
Three of these top five products were also distribution channel bestsellers. AIG Annuity's Flex 5 & 7 reclaimed leadership in the bank and large/regional broker-dealer channels. New York Life's Preferred Fixed Annuity retained its long-running top spot among captive agents. An Allianz product led in sales by independent producers for the fourteenth consecutive quarter, with Endurance replacing MasterDex. GPA Plus, a book value annuity issued by John Hancock (TSX:MFC), continued as the independent broker-dealer channel's bestseller for the tenth quarter straight(8). Allstate Financial took back the top spot in the wirehouse channel with its ChoiceRate Annuity (an MVA product).
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
Broker-Dealers John Hancock GPA Plus Book Value
Independent Producers Allianz Endurance Indexed
Large/Regional
Broker-Dealers AIG Annuity Flex 5 & 7 Book Value
Wirehouses Allstate ChoiceRate MVA
Financial Annuity
Sales generally continued to shift toward longer rate terms in fourth quarter, 2007. Rate terms of five years or more had an 83.6% share of MVA sales, up from 81.7% in third quarter. The ten-year interest guarantee period (IGP) alone had a 16.9% share of sales -- the highest level since third quarter, 2004. Book value sales moved more toward the middle, with IGPs of three and five years picking up share from shorter and longer rate terms.
"Interest rates declined during fourth quarter. But the yield curve steepened because shorter rates fell more than long term rates, helped by Federal Reserve rate cuts. Fixed annuity credited rates at or above the important 5% threshold level were available, but only on increasingly longer rate terms as the quarter progressed," said Jeremy Alexander, CEO of Beacon Research. "The steeper yield curve and a declining stock market helped the quarter's results beat those of fourth quarter, 2006. Relative to the prior quarter, sales held up remarkably well considering a general move to short term, liquid investments like money market funds by conservative investors. MVAs were the only product type to decline relative to both periods, and more than half of the decrease was due to a steep drop in a single carrier's sales. The steepening yield curve and general demand for retirement income helped boost immediate annuity sales relative to both periods. These factors may help to sustain sales of this product type in 2008, but if rates continue to decline, it could be a rough year for fixed annuities in general."
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 extent of 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 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.
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(1) Sales figures do not include structured settlements.
(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) Aviva USA is a subsidiary of Aviva plc (LSE:AV).
(5) Old Mutual Financial Network is the marketing name for the U.S.
life and annuity operations of Old Mutual plc (LSE:OML).
(6) Based on consolidated sales of MasterDex, MasterDex 5, and
MasterDex 10 in all states including New York.
(7) This total excludes immediate annuities.
(8) 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.