Equity-indexed annuity sales unfazed by market volatility. (Life/Health).Equity-indexed annuity equity-indexed annuity A contract with an insurance company that promises periodic payments keyed in a specified manner to a stock market index. Unlike variable annuities, equity-indexed annuities specify a guaranteed minimum return that is typically 3%. manufacturers enjoyed sales of $1.59 billion in the third quarter 2001, up 31% from the same time in 2000, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. The Advantage Group, St. Louis Louis, titular duke of Burgundy Louis, 1682–1712, titular duke of Burgundy; grandson of King Louis XIV of France. He became heir to the throne on the death (1711) of his father, Louis the Great Dauphin. , which tracks the industry Sales were $4.45 billion through the year's first nine months, putting the industry on track to increase sales for a sixth consecutive year, said Jack Marrion, president and founder of the company. The industry needs less than $1 billion of sales in the fourth quarter to again break its sales record, he said. Despite the year-over-year surge, sales were down by 0.75% from the second quarter, the industry's best. Marrion explained the drop by noting that there were virtually no sales during the week or so after Sept. 11, based on anecdotal evidence anecdotal evidence, n information obtained from personal accounts, examples, and observations. Usually not considered scientifically valid but may indicate areas for further investigation and research. . "So one-twelfth of the quarter was gone," he said. Forty companies participated in the equity-indexed annuity third quarter survey, representing 91% of companies that offer the product. Marrion estimates they account for 99% of total equity-indexed annuity sales, with the top-10 players responsible for 87%. Midland National Life Insurance Co., Sioux Falls Sioux Falls, city (1990 pop. 100,814), seat of Minnehaha co., SE S.Dak., on the Big Sioux River; settled 1856, inc. as a village 1877, as a city 1883. Settlers abandoned the site in 1862 because of Native American raids, but with the establishment (1865) of Fort , S.D., bumped the Allianz Life Insurance Company of North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. from the top spot, with premiums of $325.6 million to Allianz's $324.7 million. Allianz had been the top seller for five consecutive quarters. The average equity-indexed annuity premium in the third quarter was $33,032, up about 10% from the second quarter. Equity-indexed annuities with surrender periods of 10 years or more accounted for about 80% of sales. Marrion said that based on premium, the weighted surrender period on product sold was 11.75 years. As with variable annuities Variable annuities Investment contracts whose issuer pays a periodic amount linked to the investment performance of an underlying portfolio. , the industry has embraced the use of bonuses to attract new buyers. Marnon said the greatest sales growth in the third quarter was in products offering bonuses of 5% or more of the initial premium. These higher bonuses, which Marrion said "are more appealing to people with surrender charges Surrender Charge A fee levied on a life insurance policyholder upon cancellation of his or her life insurance policy. The fee is used to cover the costs of keeping the insurance policy on the insurance provider's books. on their existing policies," started to appear about the middle of 2000 and have become more noticeable since January 2001. Some companies have offered smaller bonuses of 1% to 3% from the time equity-indexed annuities were first marketed, he said, but the higher bonuses appear to be incentives for people to exchange existing policies for new ones. Commissions are also on the rise. In the third quarter, the average weighted agent commission was 10.62% of premium, up from 8.05% in 1998. Companies pay higher commissions on policies with longer surrender periods, Marrion said. Equity-indexed annuity sales are still only a fraction of variable annuity Variable Annuity An insurance contract in which, at the end of the accumulation stage, the insurance company guarantees a minimum payment. The remaining income payments can vary depending on the performance of the managed portfolio. sales. According to reports from the Variable Annuity Research and Data Service, variable annuity sales hit a record $138 billion in 2000, but had fallen off that pace in the first half of 2001, with $57.7 billion in sales. Marion said, however, that he has been receiving inquiries about equity-indexed annuities from the big players in the life insurance industry many of whom had shown interest in 1995-96 but had decided against designing a product. If they join the fray fray 1 n. 1. A scuffle; a brawl. See Synonyms at brawl. 2. A heated dispute or contest. tr.v. frayed, fray·ing, frays Archaic 1. To alarm; frighten. 2. in the coming months, they likely would design a different type of product for investment advisers with lower commissions and costs, he predicted. Index Annuities Third-quarter sales leaders: Company ($ Millions) Midland National $325.6 Allianz 324.7 American Equity 220.3 AmerUS Group 130.9 Jackson National 85.9 Conseco 82.4 Keyport Life 67.4 North American 62.0 ING USG Annuity 43.0 Fidelity & Guaranty 42.0 Source: The Advantage Group |
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