The fixed (equity) indexed annuity (FIA) was introduced 20 years ago. The timing for this product was perfect for where the economy was in the early 90s. 1994 had been a rocky year; bond fund returns were poor, the S&P 500 ended the year on a down note, and many stock funds and variable annuities had marginal or negative returns.
In addition, the 8% and 9% yields consumers realized on traditional fixed annuities during the previous decade appeared to be gone for good. From a historic point of view, interest rates were on a long downward slope, and insurers were looking for an annuity that could continue to deliver respectable returns. They picked a product that would create acceptable returns.
Over the last 20 years, fixed indexed annuities have been a part of the longest and strongest bull market in U.S. history, as well as witness to two of the worst bear markets since the Great Depression. Through it all, indexed annuities have done exactly what they were designed to do.
FIAs provide the potential for a little more interest than a stated-rate annuity would pay while still protecting premium and credit interest from market risk. Here are a few highlights from that history of protection and potential.
Since 1995, roughly $400 billion in fixed index annuities have been purchased by millions of consumers. The non-complaint percentage of indexed annuity owners is 99.994%, demonstrating that people are happy they bought an indexed annuity.
More than $100 billion of lifetime income has been guaranteed by indexed annuity carriers, which will help to provide retirement security for a substantial wave of retirees. Carriers continue to innovate, adapt and excel in creating new solutions.