Second-Quarter Sales of Equity-Indexed Annuities Dip Slightly; AIG Unit Re-Enters Market
August 20, 2010 by Fran Lysiak
August 17, 2010 | BestWire Services
Total second-quarter U.S. sales of equity-indexed annuities stood at $8.38 billion, a dip of 0.1% from the same period a year ago but sales rose nearly 23% from the first quarter, according to AnnuitySpecs.com, a firm that tracks the data.
It was the second-highest quarter ever for sales, as continuing record-low interest rate environment fueled sales, said Sheryl J. Moore, president and chief executive officer of AnnuitySpecs.com, in an e-mail. Bank certificates of deposit rates were at 1% and fixed annuities were crediting only 3.65% on average, according to Moore.
Moore said Western National Life Insurance Co., a unit of American International Group (NYSE: AIG), which exited the indexed-annuity market in 2008, re-entered it in mid-June, when the final financial-services regulatory reform legislation was coming down the pike. The company was formerly known as AIG Annuity Insurance Co.
In the second quarter, Allianz Life Insurance Company of North America, a unit of Germany’s Allianz SE, kept its position at No. 1, with sales of $1.63 billion and a 19.47% market share, according to AnnuitySpecs.com
Maintaining second place was Aviva USA, a unit of U.K.-based Aviva plc, with sales of $1.49 billion and a 17.7% market share; American Equity Investment Life took third place, with sales of $950.1 million and an 11.3% market share, while Lincoln National Life ranked No. 4, with sales of $523.1 million and a 6.2% market share.
North American Company for Life and Health Insurance, a member of Sammons Financial Group, rounded out the top five, with sales of $496.7 million and a 5.9% market share.
Last month, the U.S. Court of Appeals for the District of Columbia Circuit ordered a U.S. Securities and Exchange Commission rule to regulate indexed annuities as securities be vacated (BestWire, July 13, 2010).
Industry research organization LIMRA said indexed-annuity sales matched the record levels in the second quarter of 2009, also noting market volatility helped sales.
Moore also said she’s seeing “several large, highly rated insurers developing products now.” She didn’t disclose company names.
With an indexed annuity, an insurer invests most of the principal in bonds to ensure the policy will generate a small annual return, but the insurer uses a small portion of the premium to buy options in a stock market index, primarily the S&P 500 index. 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.
(By Fran Matso Lysiak, senior associate editor, BestWeek: fran.lysiak@ambest.com)
