Fixed index annuity sales in the 1st quarter of 2007 fell nearly 4.2% from the previous quarter and 9.4% from the 1st quarter of 2006, as reported by Advantage Compendium, St. Louis, Mo.
Drawn from 57 FIA carriers' results, the sales figures represent 96% of the active index product companies and 99% of FIA production, says the Advantage Index Product Sales Report-1st Quarter 2007. Results from 2 companies were estimated.
Total sales for the 1st quarter came to a little over $5.7 billion. In the previous quarter, FIA sales totaled nearly $6 billion.
By comparison, the top sales quarter for FIAs was the 2nd quarter of 2005, when sales were over $7.4 billion, according to Advantage figures.
The 1st quarter decline reflects strong competition from rising interest rates now being offered by bank certificates of deposit, suggests Jack Marrion, president of Advantage Compendium.
"Historically speaking, we've seen this happen before," he says. "When CD rates go up, fixed annuity sales slow down."
A secondary factor may be the fallout form the "re-shuffling for market share" that Marrion says he sees occurring among FIA carriers.
Some of the reshuffling may reflect response to the National Association of Securities Dealers' controversial Notice 05-50, he says. Now nearly 2 years old, that Notice had cautioned broker-dealers against allowing index annuity sales that do not meet certain requirements. Less than 1% of FIA sales go through B-Ds, Marrion allows. Still, sales are increasingly trending toward going through carriers that generally "do a good job with B-Ds."
