In Practice March 25, 2007

Boomer Retirements Fuel Annuity Sales

Advisers who currently target small businesses – or who work with individual participants at businesses of any size – could see a major shift over the next decade, according to a new study.
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According to a report by Reuters, Eric Sondergeld, director of retirement research at LIMRA International, said that growth in the annuity marketplace in 2006 was fueled by new plans offering guaranteed income for life and programs that insure accounts will not go down even if the market falls. “More people are going into retirement with fewer and smaller pensions,” Sondergeld said, according to Reuters.

Individual annuity sales in the U.S. reached $236.2 billion in 2006, an increase of 9% over 2005, mainly due to retiring baby boomers seeking guaranteed income, according to LIMRA International. These sales were boosted mostly by record sales of variable annuities, which rose 17% to $160.6 billion in 2006. The fourth quarter of 2006 was the sixth straight quarter in which variable annuity sales increased when compared with the same quarter from a year ago. Contrarily, sales of fixed annuities fell by 5% in 2006 to $75.6 million, according to a LIMRA press release.

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Research findings that the top annuity selling firms were insurers and that financial planners were the most successful at selling annuities points to retiring baby boomers as the main driver of sales. Growth was seen among all distribution channels, with the largest growth seen among financial planners and independent broker-dealer, whose sales growth in both fixed and variable annuities was up 31% overall for 2006. Growth was also seen by stockbrokers(14%) and career agents (11%). Although banks increased their variable sales by 20%, their fixed annuity sales saw a decrease of 14%, so their annuity growth had a net increase of 1%.

The top overall sellers of individual annuities were American International Group Inc. (AIG), MetLife, ING, Hartford Life, TIAA-CREF, and AXA Equitable, the press release said. The top six variable annuity writers remained unchanged over the previous year, LIMRA said: TIAA-CREF, AXA Equitable, MetLife, Hartford Life, ING, and Lincoln Financial. The best sales in fixed annuities were seen at AIG, Allianz Life, Allstate Financial, New York Life, Aviva, and ING.

The ranking of all annuities sellers can be found here.

Compliance March 24, 2007

Most Tell SPARK They’re Ready for 22c-2

Nearly all recordkeepers say they’ll be ready for the Securities and Exchange Commission's (SEC) Rule 22c-2 deadline of April 16.
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Ninety percent of retirement plan intermediaries said they will have signed Information Sharing Agreements with their largest mutual fund trading partners in time to meet the SEC deadline. About half (53%) of those intermediaries will conduct intermediary monitoring in order to facilitate compliance, according to a study by the SPARK Institute.

However, only 68% of respondents to the survey said they had signed agreements with at least one-half of their top 50 trading partners as of March 13, 2007, the Institute said in a press release. Although none of the respondents considered any of their top 10 relationships to be at risk of termination, about 10% of the intermediaries said they considered an average of 5 of their top 50 trading relationships to be at significant risk, mostly due to lack of response or agreements from certain fund companies.

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As part of that information sharing, more than two-thirds (68%) of retirement plan intermediaries will supply full Social Security numbers in their regular information reports. The rest will provide either partial Social Security numbers or a unique identifier.

84% of intermediaries will either charge a fee or will seek reimbursement for some expenses associated with Rule 22c-2 compliance.

The SEC put the finishing touches on the rule, which helps funds enforce bans against market timing and other abusive trading practices, in September 2006.

More information can be found at www.sparkinstitute.org.

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