Study finds fixed indexed annuity returns attractive and consistent

By Jason Kestler

Kestler Financial Group, Inc.


A recent study released by the Wharton School of the University of Pennsylvania indicates that fixed indexed annuity returns are not only much more consistent than S&P 500 index returns, but are quite attractive as well.

The study examines five-year annualized returns from 1997 to 2009, calculating industry average annuity returns based on actual returns credited by insurance carriers that offer fixed indexed annuities.

S&P 500 index returns, including dividends, are regarded as the premier measure of U.S. stock market performance. All periods studied ran from Sept. 30 of the beginning year to Sept. 30 of the fifth year, except for the 1997-2002 period which used a Jan. 2 date.

The industry average annuity return exceeded 4 percent in all eight of the five-year periods examined. In contrast, only three of the annualized S&P 500 returns exceeded 4 percent, while in four of the periods, the S&P 500 index had a negative return.

Five Year Period Average Annual S&P 500 Return Average Annual Annuity Return
1997-20029.39%9.19%
1998-2003-0.42%5.46%
1999-2004-2.77%4.69%
2000-2005-3.08%4.33%
2001-20065.11%4.36%
2002-200713.37%6.12%
2003-20083.18%6.05%
2004-2009-1.05%4.19%


Perhaps not surprisingly, the study noted sales of fixed indexed annuities have climbed steadily since their introduction in the mid-1990’s. Recent sales levels have consistently exceeded $25 billion per year annually.