Lakewood Insurance Agent discusses Uncertainty and Annuities

Lakewood Insurance Agent Sam Morris discusses the Uncertainty and Changing Times for Individual Annuities.

Sam Morris, Insurance Agent

With markets recovering and interest rate spreads narrowing, the balance in individual annuity sales shifted in the second quarter from fixed to variable annuities (”VA”s).  Fixed annuity sales had out preformed Vas for the previous two quarters before hitting a decline in sales sharply.  When combined with a weak gain in VA sales, the total individual annuity sales for the quarter fell 9% compared to first quarter 2009.  This was the first decline in overall annuity sales since the market collapse of 2008.  This led to a lower first quarter performance for the first half.  For the second half of 2009, VA sales will likely remain fairly level.

Growing needs for retirement income will help fixed annunity immediate sales, regardless of the low interest rate.  The fixed annuity policyholders may not get a better deal in a declining interest rate environment and existing VA owners may hold on to their contracts since their guaranteed benefits are in the money.

• In first half 2009, total individual annuity sales fell 3% to $126.8 billion as strong fixed annuity sales more than compensated for weak VA sales.
• Compared with first half 2008, year-to-date fixed annuity sales were up 39% to $64.2 billion while VA sales slipped to $62.6 billion, down 26%.
• In second quarter 2009, rising equity markets helped push VA sales to $31.9 billion, up 4% compared to the prior quarter.

The VA sales continue to be fueled by living benefit guarantees.  This despite many companies raising fees, reducing benefits, or both on new riders.  The rate, at which any guaranteed living benefit was elected, when available at purchase, remained very strong at 89% during the quarter.  Companies that made improvements to their GLB riders or did not scale them back in the quarter.  The double-digit growth that fixed annuities saw over the past four quarter’s slowed to just 9% in second quarter 2009.  The appeal of fixed annuity products seemed to wane because of a decline in annuity interest rates and their corresponding spreads.  Indexed annuity sales hit a record high $8.1 billion in second quarter 2009, and improvement of 14% over first quarter 2009.

Lakewood Insurance Agent Sam Morris has been providing Annuity products, along with residential property coverage, auto insurance coverage, disability income coverage, and general liability coverage to clients in Garland and East Dallas since 2000. Sam is a veteran of the armed services and makes it his personal mission to make sure that you have the right coverage… not too much nor too little. Please call 972-240-8075 today for a personal consultation with Sam.