Fixed indexed annuity products have been the highlight of the annuity industry lately when it comes to sales. LifeHealthPro’s Jamie E. Green, Warren S. Hersch and Emiliie Holbrook did some research to determine “Why fixed indexed annuity sales continue to grow.” These annuities were introduced in the 1990’s, so they are still considered relatively new to the industry. Sales in 2014 were almost $47 billion, making it the sixth year in a row for record sales of fixed indexed annuities. Wink’s Sales & Market Report found that first quarter sales were $11 billion this year, which is the highest first quarter sales for the products since they were introduced.
Why are fixed indexed annuity products seeing such high sales and getting so much attention? The insurance industry has had a difficult five years with the Great Recession followed by continued low interest rates. It makes sense that consumers would be turning to fixed indexed annuities. An increasing number of Americans are worrying about market volatility, but don’t want to avoid the markets altogether. Fixed indexed annuities pay a guaranteed minimum return and offer the potential for larger gains if the market increases. They also protect your principal from market downturns. These annuity products have a plethora of different features, options and index choices. They can be complicated, so advisors have to know what they are selling and really determine whether a fixed indexed annuity will meet their client’s needs.
Athene recently sponsored National Underwriter Life & Health’s study asking financial advisors about their annuity sales. All of the questions asked to these advisors pertained to their annuity sales over the past year. The average premium for a new annuity purchase was $983,000.The most tenured advisors surveyed, those working for more than 20 years, sold $1.1 million in new annuity products last year. Fixed indexed annuities were the annuity type sold most by those surveyed for this study. Seventy percent of the advisors had sold at least one fixed indexed annuity. Fixed indexed annuities made up 53% of the total annuity sales, followed by variable annuities at 20%, traditional fixed annuities at 13%, immediate annuities at 6%, deferred income annuities at 4% and miscellaneous making up the last few percent.
Fixed indexed annuity products offer unique benefits that make them popular during our current economic conditions. While these annuities won’t work in every retirement income portfolio, they might be the way to help create income from your retirement savings.
Written by Rachel Summit