Benefiting from depressed rates on certificates of deposit, indexed annuity sales experienced a bump in sales during the second quarter.
Sales of the products surged to $8.4 billion, growing 18% from the first quarter. Meanwhile, income annuities climbed 30% to $2.3 billion during the same period, according to data from Beacon Research Publications Inc.
Fixed-rate market-value-adjusted annuities, which pay a fixed rate of return for a specified time period, climbed 4% to $1.5 billion, and book-value fixed annuities declined by 5% from the first quarter to the second quarter, for a total of $8.2 billion.
However, the $20.4 billion in total fixed-annuity volume for the second quarter was flat, compared with last year.
“It's possible that as interest rates have dropped, some reps might not want to put clients into an immediate annuity now,” said Judith Alexander, director of sales and marketing at Beacon. “But I predict that when rates rise, we'll see a lot of pent-up demand for immediate annuities.”
Marking a first for Beacon's fixed annuity study, an indexed annuity, the ING Secure Index 7, was the top-selling product among independent broker-dealers. Previously, the MassMutual RetireEase immediate annuity was in that position.
However, the independent-broker-dealer channel only accounts for a fraction of overall indexed annuity sales; independent insurance agents drive most of the volume.
Still, some insurers that sell indexed annuity have said they expect to make greater inroads in the broker-dealer community, including American Equity Investment Life Holdings Inc. and ING Life Insurance and Annuity Co.
Broker-dealer executives reported tepid demand for indexed annuities from their advisers.
“We have had a few brokers call in because a client talked to someone or saw an ad somewhere and wanted to know more about them,” said Kraig Lange, first vice president and manager of the insurance department at
Stifel Nicolaus & Co. Inc. “We sell more immediate annuities than indexed, and brokers are mostly selling variable annuities here.”
Low interest rates have also been a double-edged sword for indexed annuities, as they drive consumer interest in CD alternatives, but lead insurers to make their products less attractive, noted Scott Stolz, president of Raymond James Insurance Group. “Lately, the low rates have made it harder to sell,” he said.
