The close of 2009 was particularly challenging in terms of forecasting index annuity sales.
During the year, some companies had tried to limit competitiveness by making their index annuities less attractive, thereby limiting sales. All indicators suggested that these companies had probably placed more premium than they had cared to. So, predicting which way sales would go was truly a coin toss.
As it turned out, it was a record year for index annuity sales, topping $30.1 billion. That blew away the previous sales record of $27.2 billion (in 2005) by more than 10%.
Talk about enthusiasm–those numbers electrified many interested parties, such as:
Insurance agents. The vast majority of index annuity agents are reporting that their own index annuity sales were up. To what do they attribute this?
For one thing, interest rates on bank certificates of deposit are at a paltry 1.26%. To those who remember how CD rates were at nearly 7% at the turn of the century, the "safety of CDs" is just not worth the payoff in today's market. Index annuities, on the other hand, are currently offering the potential for 11.5% annual gains and higher. That is a strong value proposition for clients needing or wanting a guarantee, but desiring the ability to outpace inflation.
A second reason is the brush with the market that the agents' clients experienced in the wake of the 2008 crash. Losing half of a retirement nest egg in stocks, mutual funds, or variable annuities served, for them, as a stunning reminder of just how important principal really is. Perhaps Will Rogers said it best: "I'm more concerned about the return of my money than the return on my money."
As a result, agents who sold index annuities were most definitely the beneficiaries of recent changes in the interest rate and market environments.
Insurance companies that offer index annuities. Today, there are 44 companies offering these products. Of that group, an astonishing 20% reported sales increases of more than 100% from 2008 to 2009.