Annuity IQ

This is the headline that a certain, previously mentioned, financial writer wrote back in 1997. I would just like to point out that he was, and still is, wrong. NAVA just released their fourth quarter variable annuity sales data yesterday and sales were up.

annuity sales were just not up a little bit, but they were up a lot. We are talking about an 18.2% increase in year over year sales. That may not sound like much, but when you are talking about 133 billion dollar a year business (that was 2005 sales) an 18% increase is very substantial. I have to say that these new numbers are impressive to say the least.

Total sales for 2006 were 157.3 billion dollars driving total assets in variable annuity contracts to about 1.36 trillion dollars. You know what some of these people are going to be writing about variable annuities over the next week or so. Let’s take a look at some of the potential headlines.

“variable annuity Swindling Continues at Record Pace!”

“The annuity Rip-Off”

You get the point, they will pick apart the numbers and say annuity agents are ripping people off, which is not true. The fact of the matter is that investors want some type of guarantee on their money, which historical investments cannot provide.

What the anti-annuity crowd will come out and say is that net flows are much lower than the gross number mentioned above. This is true for various reasons, but mostly because you have money coming out of contracts. Net flows in 2006 were up 45% to 29.8 billion dollars.

Also, what I find amazing is that the drive by financial writers will not point out that over 60% of all variable annuity assets are in equities and a little over 10% is invested in bonds or money market accounts. They will also not tell you that almost 20% of these assets are invested in fixed accounts, these are numbers from across the board.

Why would I bring this up? Simple, they, the media, always say that brokers/agents invest money to aggressive in variable annuity contracts. These numbers illustrate that is not the case at all, it shows wide diversification and that brokers are following asset allocation plans within variable annuities.

Anyhow, these new numbers prove that variable annuities are not dead, but thriving during adverse conditions. Maybe the Ivory Tower writers should start to actually understand these products better instead of pretending that they know what they are talking about.