NEWS

WIRES

OTHER

Five Year Index Annuity Returns Top Bank Competition

Average Index Annuity Return Was 70 Percent Higher Than Average CD Concluding At The End Of September 2005

Put a spin on the numbers and the worst performing index annuity still beat the total return of the average stock mutual fund by over 4 percent and the average "Index Annuity" return was 70 percent higher than the average CD for the five year period ending September 2005. The reality is index annuities performed reasonably, but not exceptionally, in a difficult five year timeframe.

The average index annuity total return was 24 percent for the five-year period. Average Index Annuity return was 70 percent higher than the average CD.

Advantage Compendium Ltd completed its five-year Index Annuity Return Summary whereby carriers were asked to send copies of actual customer statements, with the personal data blacked out, for the five-year period commencing at the end of September 2000 and concluding at the end of September 2005. In all, return data from 27 products was obtained representing over 80 percent of active carriers.

The lowest returns were realized on term end point and high water mark structures. Since the beginning and highest index value was the same these annuities credited their minimum return. It should be noted that these structures have produced the highest returns of all index annuities in other periods. Differences in individual policy performance were more a result of product design and luck of the market rather than renewal rates or methodology.

The index annuity crediting the most interest for the period was the Midland National Life policy a dramatic 51 percent and this was realized by consumers selecting a combination of the S&P 400 MidCap, the S&P 500 and Russell 2000 Index back in 2000. Consumers choosing the bond index within their American Equity New Millennium were rewarded with a total return of 38 percent for the next five years, and the availability of a premium bonus pushed certain Allianz and Americo returns to over 35 percent.

Although some people make much of the fact that index annuities do not offer full index participation or include reinvested dividends, it would be quite impossible to compare the effective participation rate of an index annuity with the S&P 500 index, or even an index fund, because both lost money over the five year period, but every index annuity earned interest.