It is hard to believe that the Securities and Exchange Commission approved the controversial Rule 151A more than a year ago—yet the securities status of indexed annuities is still unclear. This month’s issue focuses on annuities, and the lead article talks about indexed annuities, 151A, and the possibilities that we should all be considering. Is this “turf war” all but over, or does the insurance industry still have a chance to rescue its indexed annuity “province” from the realm of the SEC? Perhaps in the February 2011 issue we will know (but don’t count on it).
Annuities are an integral part of nearly every producer’s portfolio of products. According to LIMRA, annuities sales have exceeded $200 billion every year since 2002.
Dan Beatrice, senior analyst, retirement research, LIMRA, had this to say in an article he wrote (“Is There Growth For Annuities,” LIMRA MarketFacts Quarterly, Fall 2009): “Despite years of lackluster interest among consumers and the media, sales of individual annuities have provided a tremendous success story. While growth has occurred both for accumulation products and for payout products, deferred annuities have accounted for 95 percent of sales.
Beatrice states that there are underlying factors that have influenced this growth: aging population, loss of defined benefit plans, underfunded Social Security system. He adds that sales success is also due in part to expanded sales through banks, broker/dealers and wirehouse relationships, as well as product developments. Yet sales have decreased in three of the eight years since 2000, and LIMRA projects that the 2009 results will be down.
At the time this column was written, the third quarter results for 2009 were not available, but LIMRA’s estimates are shown below.
Annuity Industry Sales Estimates*
(Dollars in Billions)
Third Quarter Percent
Annuity Type 2009 2008 Change
Variable
Separate Accounts $22.2 $26.8 -17%
Fixed Accounts 9.5 11.0 -14%
Total Variable 31.7 37.8 -16%
Fixed
Book Value 10.3 13.3 -23%
Equity Indexed 7.3 6.9 6%
Market Value Adjusted 2.6 4.3 -46%
Fixed Deferred 19.9 24.5 -19%
Fixed Immediate 1.7 2.1 -19%
Structured Settlements 1.3 1.6 -18%
Total Fixed 23.0 28.2 -19%
Total $54.7 $66.0 -17%
*Based upon data from 62 companies, representing 97 percent of total sales.
While we’re on the subject of annuities, did you know that there is an Annuity Museum? Yes, Hersh Stern, well-known annuity analyst and scripophilist is conservator of “the world’s largest collection of historical documents and memorabilia about annuities.”
Scripophilists are hobbyists who focus on collecting historical financial documents. This practice is a branch of numismatics. Annuity scripophily holds invaluable importance for those interested in learning how the financial instruments of yesteryear have impacted the world of finance today. For those interested, the Annuity Museum goes back to the origins of annuities and exhibits their role in the development of financial markets and retirement planning—and it can be viewed entirely online.
Hersh Stern says, “Annuity artifacts have appeared in numerous forms, from advertisements to carefully wrought, scripted letters and—like stocks and bonds—such documentation holds significant aesthetic appeal. However, the financial role annuities have played through history is a much more varied one, and the collection of annuity documents touches upon diverse cultures, nations and purposes.”
For more information go to www.immediateannuities.com/annuitymuseum.
