Legacy Marketing Group, an insurance marketing organization, recently brought Sheryl Moore to Phoenix to brief affiliated financial professionals on the state of the indexed market.

Moore — the president of Wink Inc., a financial services data company, and the head of Moore Market Intelligence, a firm that tracks the indexed insurance product markets — has access to broad, deep indexed annuity product databases that stretch back for years.

Here are five glimpses of the indexed annuity insights in the databases, drawn from a slide deck Moore used in the presentation.

 

1. The typical contract sold is getting bigger.

Wink figures show that the typical premium increased to about $121,000 per contract in 2017, from about $54,000 in 2008.

2. In recent years, commission rates have been falling.

The typical Indexed annuity commission fell close to 6.1% in 2017. That’s down from about 6.2% in 2016, and down from more than 6.6% in 2014.

3. The typical return cap has been increasing.

Wink records show the typical cap was about 4.8% in 2017. That’s up from 3.6% in 2016.

4. The typical surrender charge period is 10 years.

Wink records show that about 44% of indexed annuity sales involve contracts with 10-year surrender charge period. Only 0.1% are for products with surrender charge periods of four or fewer years; 2.5% are for products with surrender charge periods of 15 or more years.

5. The S&P 500 index is still the dominant index.

In the third quarter of 2018, about 52% of indexed annuity sales involved use of the S&P 500 stock index. The only other individual investment index with a sales share over 1% was the Nasdaq-100 index, with a 1.8% share.

 

Indexed annuities are insurance contracts that, depending on the contract, may offer a guaranteed annual interest rate and some participation growth, if any, of a stock market index. Such contracts have substantial variation in terms, costs of guarantees and features and may cap participation or returns in significant ways. Any guarantees offered are backed by the financial strength of the insurance company. Surrender charges apply if not held to the end of the term. Withdrawals are taxed as ordinary income and, if taken prior to 59 ½, a 10% federal tax penalty. Investors are cautioned to carefully review an indexed annuity for its features, costs, risks, and how the variables are calculated.

 

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