The Emotional and the Technical
March 1, 2012 by Ron Panko
Indexed annuity writers were on track in late December to achieve their third consecutive year of record sales, as buyers sought to protect their assets from frightening volatility in the stock market, and to earn more than prevailing low-interest rates.
The appeal seems to reflect investors’ weariness with the relentlessly bad economic news. “They’re tired of losing money in the market,” said Debra Richardson, executive vice president at American Equity Investment Life Insurance Co.
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The past three years have been the best period ever in sales of indexed annuities, en thought they have been beset by regulatory issues, said Des Moines-based Sheryl Moore, president and chief executive officers of AnnuitySpecs.com, LifeSpecs.com and Avantage Group Associates. Sales have risen from just over $6 billion in the fourth quarter of 2007 to more than $8.7 billion in the third quarter of 2001, Moore said.
“We’ve had record sales every year since 2009, and we are on track to have record sales again this year,” she said in December.
Usual, variable annuity sales fall after the stock market declines, and the sales of fixed and indexed annuities rise because they offer a return of principal, Moore said.
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“Now indexed annuities are competitive compared to fixed annuities and CDs” Moore said. Through the third quarter, indexed annuities account for one of every two fixed annuity sales in 2011, she said.
Moore has bonded emotionally to the product. Early in her career, when she worked at various positions in the home offices on insurers in the Des Moines area, Moore saved as much money as she could in her 401(k) plan. But when the stock market crashed after 2000, she lost half of her month.
“Nobody told me I could lose money in a 401(k),” she said. “I was a life insurance expert and didn’t know much about annuities. Nobody talked about indexed annuities. That made me so angry that I decided to cash out what was left of my 401(K0, quit working in a home office and start my own company because I wanted to educate people about indexed life and annuities so no one ever has to go through what I went through.”
She has since turned a profit every year by charging insurers a flat fee to help them in product development, market research, competitive intelligence, training and compliance, she said.
Moore was also active in the industry’s successful efforts to stop the Securities and Exchange Commission from classifying indexed annuities as Securities.
Over the years, Moore has invested in severy indexed annuities with different anniversary dates. From early 2008 to early 2009, she felt fortunate to earn 0% when stock funds list more than half their value.
“I had a friend in the Iowa Insurance Department who had $1 million in a retirement account, and he lost half-a-million dollars in a variable annuity. He couldn’t retire, and he is still working today”.
During the past three years, her indexed annuities have gained from 0% to 9% annually, she said. “If you buy when the market is really low, you can earn good returns, but market timing is not necessary with this product,” she said.
