Market Overview / Sales

As you will see, the fixed annuity offers guaranteed returns and a traditional annuity can guarantee an interest rate for a multiple of years.  You should also know that with a traditional fixed annuity, the insurance company sets the rates to be credited in each account. With FIA’s, earnings are linked to an index or indices. Also, dollars inside of a fixed annuity are part of the insurance company’s general account with all guarantees backed by the financial strength and claims-paying ability of the issuing insurance company.

On the other hand, with a variable annuity, the assets are invested in a separate account, which is subject to market fluctuations and where the value may be more or less than the original premium. A separate account is not part of the general account of the insurance company. As a result, these assets are not subject to the claims of creditors of the insurance company who issued the variable annuity. With variable annuities, there are also various levels of risk because there are a wide variety of variable investment options from which to select. These options potentially provide the owner of the variable annuity with a greater possible reward than is typically available with a fixed annuity.

According to The National Association for Variable Annuities (NAVA) and VARDS, a product of Finetre Corporation, combined net assets of U.S. variable annuities increased to 1 trillion dollars at the end of the first quarter of 2004 with 54.6% of those assets held in equity accounts and 25.4% in fixed accounts.

According to NAVA, VARDS and LIMRA International total annuity sales in 2003 totaled 214 billion dollars with 87.6 billion going into the fixed annuity and 126.4 billion going into the variable annuity.

It is interesting to note that only 11.5 billion dollars of the 214 billions dollars of total annuity sales went into Immediate Annuities. While Immediate Annuity sales appear to be a small percentage, it is over 100% greater than 5 years earlier. In fact Immediate Annuity sales have increased for at least 7 consecutive years

Growth Potential
The immediate annuity market has the potential of growing faster than any other type of annuity. Why? As you’ll soon see, certain age groups are increasing at a rate of 1,000%. People are not only living longer, but they are becoming increasingly concerned that they are living longer. And, an immediate annuity is the only financial product that can provide guaranteed income for as long you live.

A similar upward trend can be said about the Equity Indexed Annuity (EIA).  LIMRA International reports that Equity Indexed Annuity sales in 2003 were 12.6 billion dollars. While this is only approximately 15% of total fixed annuity sales, Equity Index Annuity sales have also increased every year for 8 consecutive years with 2003 sales around 800% greater than 1996.

Growth Potential
The EIA market’s future is very promising.

Increasing public awareness, financial professional training, and observing how these contracts have performed during the best and worst of times will allow the EIA to grab a higher market share.