EVANSTON, Ill., Aug. 28, 2006 (PRIMEZONE) -- Stimulated by higher interest rates, U.S. sales of fixed annuities climbed to an estimated $17.9 billion in second quarter, 2006, an 8% increase from the previous quarter. Overall sales were boosted by growth of 76% in market value-adjusted (MVA) annuities and 8.7% in book value products (a), according to new data from the Beacon Research Fixed Annuity Premium Study based on sales of 50 insurance companies. But results were 14% below the same period last year. Second quarter indexed annuity sales were an estimated $6.2 billion, down 2.6% from the prior quarter and 15% below second quarter, 2005.
MasterDex, an indexed annuity issued by Allianz Life Insurance Company of North America (b), was the quarter's top-selling product in the Study for the eighth consecutive quarter. Allstate Financial's (NYSE:ALL) Preferred Performance, a book value product, took the number two spot for the second quarter in a row. Two book value products issued by New York Life -- LifeStages/MainStay Preferred Fixed Annuity and LifeStages/MainStay Single Premium Fixed Annuity were number three and four, respectively (c). Both were top five products last quarter as well, and Single Premium Fixed Annuity has been among the top five for 10 consecutive quarters. Bonus Gold (Index 1-05), an indexed annuity issued by American Equity Investment Life Insurance Company (NYSE:AEL), took fifth place. Second quarter results include sales of some 218 products.
Rank Company Name Product Name Product Type
1 Allianz MasterDex Indexed
2 Allstate Financial Preferred Performance Book Value
3 New York Life LifeStages (and MainStay) Book Value
Preferred Fixed Annuity
4 New York Life LifeStages (and MainStay) Book Value
Single Premium Annuity
5 American Equity Bonus Gold (Index 1-05) Indexed
Three of the top five products also led sales in a distribution channel, with Allstate's Preferred Performance again the bank channel leader, New York Life's LifeStages Preferred Fixed Annuity the best seller among captive agents, and the Allianz MasterDex continuing as best seller among independent producers. John Hancock's GPA Plus (a book value product) kept its top-selling position in the independent broker-dealer channel(d). Allstate's Choice Rate (with MVA) was the best seller among wirehouses, a position it has held since third quarter, 2005. In second quarter, 2006, the product also topped sales to large/regional broker-dealers (e).
(a) 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.
(b) Allianz Life Insurance Company of North America is a subsidiary of Allianz AG (NYSE:AZ).
(c) New York Life products sold by career agents carry the LifeStages brand name while those sold through other channels carry the MainStay brand name.
(d) 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.
(e) Number of products for which sales were reported per channel: Banks and S&Ls -- 78; Captive Agents -- 105; Independent Producers -- 126; Independent Broker-Dealers -- 42; Large/Regional Broker-Dealers -- 32; Wirehouses -- 15.
Channel Company Product Product Type
Banks and S&Ls Allstate Preferred Performance Book Value
Captive Agents New York Life LifeStages Preferred Book Value
Fixed Annuity
Independent
Producers Allianz MasterDex Indexed
Independent
Broker-Dealers John Hancock GPA Plus Book Value
Large/Regional
Broker-Dealers Allstate Choice Rate MVA
Wirehouses Allstate Choice Rate MVA
Financial
By product type, Allstate's Choice Rate was also second quarter's best-selling MVA product. New York Life had the leading immediate annuity.
Treasury rates rose in second quarter. It appears that investors took the opportunity to lock in longer-term fixed annuity rates that were more attractive than previously available. Among book value products, the dominance of one-year interest guarantee periods (IGPs) continued to decline. The one-year IGP accounted for 71.3% of second quarter's book value sales, down significantly from 83.2% in first quarter, 2006 and 85.7% in fourth quarter, 2005. Among MVA products with IGPs of six years or more, there was also a shift to longer durations.
"Several factors converged in second quarter to boost sales of fixed annuities in general and traditional fixed rate products in particular," said Jeremy Alexander, CEO of Beacon Research. "Rising rates usually have a positive impact, but the effect was delayed until fixed annuity rates of 5% and above became available in second quarter. It appears that 5% now represents a perceived acceptable return. The positive impact of rising rates was reinforced during part of the quarter by the steepening yield curve, which increased favorable spreads for issuers. There also was a move to fixed rate from indexed annuities, especially by independent agents and brokers. Traditional fixed rate products are easier to explain to consumers and have received much less negative publicity and regulatory scrutiny. In addition, the equities market was down slightly."
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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