Fixed annuity sales in the US extended
their falling trend in the fourth quarter of 2009 by slumping to
$19.6bn, 43% lower than in the final quarter of 2008 and 11% down
from the previous quarter, reports fixed annuity research firm
Beacon Research.
The fourth-quarter sales decline followed a
year-on-year fall of 21% in the third quarter of 2009. Beacon
attributed the sales decline in both quarters to a reduction in
annuity rates offered by producers.
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The slump in sales in the second half of 2009
brought to an end a period of exceptional growth in the fixed
annuity market, which in 2008 recorded sales growth of 60% compared
with 2007 to $106bn.
Fixed annuity sales went on to record
year-on-year growth of 78% in the first quarter of 2009 and 10%
year-on-year growth in the second quarter.
From a producer perspective the fourth quarter
of 2009 was, as in previous quarters during the year, notable for
some significant shifts in market share.
For example, Western National Life (WNL), a
unit of American International Group, leapt from sixth place in the
rankings in the third quarter to first place by the end of the
year.
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By GlobalDataIn the process, WNL ousted New York Life (NYL)
from the top position it held in the previous quarter while Allianz
Life dropped from second to third. Formerly AIG Annuity Life, the
name WNL was adopted in March 2009.
Regaining some lost ground Aviva stood at fifth
position in the fourth quarter of 2009 after slipping from third
and second position in the first and second quarters of the year,
respectively, to eighth in the third.
Full year swings
Over the full year there were also some
significant changes in the ranks of the top 10 players, with
MetLife being of particular interest.
The insurer entered the top 10 ranking in the
fourth quarter of 2008 in first place, the first time ever it had
been in this position.
MetLife held onto first position in the first
quarter of 2009, faded into seventh position in the second quarter
before dropping out of the top 10 for the remainder of 2009.
NYL remained the most consistent in terms of
its ranking throughout 2009, having been in second position in two
quarters and first in two. With total sales of $9.8bn and a market
share of 9.4% NYL also ranked as the year’s top fixed annuity
producer.
Judith Alexander, an analyst at Beacon,
explained to LII that to some extent, market ranking
consistency depends on the company’s product mix and focus.
“For example, Aviva and WNL do not issue
[variable annuities], so they are generally going to be among the
top companies [in the fixed annuity market] quarter after quarter,”
she said.
She added that 2009 was a strange year for both
Aviva and WNL.
“Aviva ran into a real capital crunch and
deliberately limited new business almost any way they could,” said
Alexander.
“WNL suffered from its association with AIG in
the first half of the year. They did much better after they changed
their name from AIG Annuity, and also offered some attractive
bonuses in the second half of 2009.”
Alexander continued that Allianz and New York
Life issue both fixed annuities and , but focus more on fixed. As a
result, she explained, they are always going to be consistently
among the top players.
Product trade off
Of MetLife she said it tends to be less
consistent because it puts a lot of emphasis on .
“When fixed annuities are popular and can be
sold at a decent profit margin, they sell a lot of fixed annuities.
When variable annuities are popular, they sell a lot of ,” said
Alexander.
She added that the same reason for large
variations in market position also applies to Aegon/Transamerica,
which made its only appearances in the top 10 in the first and
second quarters of 2009, in fifth and fourth positions
respectively.
In addition, said Alexander, most fixed annuity
issuers probably have a target level of fixed annuity sales they
want to achieve every year.
“In 2009, it seems likely that many pretty much
sold most of their planned total for the year in first quarter,
which had record-high sales since our study began in the second
quarter of 2003,” she added.
Commenting on market prospects, Beacon
anticipates that sales in the first quarter of 2010 will, when
reported, be up on the previous quarter. Sales should have been
boosted by slightly higher annuity rates and increased promotional
activity by producers.
However, while Beacon anticipates that
consumer demand for fixed annuities should remain strong, further
growth will depend on interest rates and availability of investment
grade bonds to back new business.
|
US FIXED ANNUITY |
||
|
Top producers, |
||
|
Sales ($m) |
Market share (%) |
|
|
Western National Life (AIG) |
1,961 |
10 |
|
New York Life |
1,759 |
9 |
|
Allianz Life |
1,580 |
8.1 |
|
American Equity Investment Life |
900 |
4.6 |
|
Aviva USA |
889 |
4.5 |
|
Pacific Life |
855 |
4.4 |
|
ING USA |
679 |
3.5 |
|
Aegon/Transamerica |
616 |
3.1 |
|
MetLife |
491 |
2.5 |
|
Source: Beacon Research |
||
