Fixed Annuity Sales In 2nd Quarter Match Variable Annuity Sales

Historically, independent agents have been the dominant sales channel for FAs. Over the last several years, however, banks have narrowed the gap and they even outsold independent agents in the 1^st quarter of this year in FAs. However, independent agents reclaimed their fixed annuity lead in the 2^nd quarter.

Combined, these two distribution channels captured more than three-quarters of FA premiums for the 1^st half of the year. The next largest channel, career agents, captured just 10% of sales.

Stockbrokers were the leading sellers of VAs for much of the last decade; three years ago, they became the top sales channel for all annuities combined, both fixed and variable. In the years prior to that, the career insurance agent channel was the leading annuity sales channel.

Now, due to their strong FA sales, independent agents have become the leading annuity channel overall–for the first time in history!

Until 10 years ago, FAs were the dominant product. In 1992, these products posted their 2^nd consecutive annual decline in sales and just prior to that sales were relatively flat. VAs, on the other hand, had been growing steadily and surpassed FA sales for the first time in 1993.

Industry players at the time put their energy into expanding their VA distribution outlets and, as a result, adding new product features to maintain a competitive advantage and shelf space. By the late 1990s, VA market share was more than three times that of FAs.

A FA comeback was about as expected as an 8,000 (or lower) Dow.

Today, FA and VA sales are neck and neck. This time, however, FAs are coming off of a three-plus year run in sales gains. Insurers are now making sure their FA offerings are competitive. Meanwhile, some traditionally variable-only players have entered the FA market.

What remains to be seen is whether the current emphasis on FAs is simply a fad or suggestive of a trend not unlike that witnessed with VAs in the 1990s.

Eric T. Sondergeld, ASA, CFA, MAAA, is a corporate vice president and director of the Retirement Research Center at LIMRA International, Windsor, Conn. His e-mail address is [email protected] Dan Q. Beatrice, ACS, AIAA, is a LIMRA analyst and his e-mail address is [email protected].

Reproduced from National Underwriter Life & Health/Financial Services Edition, October 7, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.