Back in November 2008, as then President-elect Barack Obama and his staff prepared to transition into the White House amid near-cataclysmic economic conditions, Obama's chief of staff Rahm Emanuel put a positive spin on the landscape facing the new president. "Rule One: Never allow a crisis to go to waste," he said during an interview on the CBS news program Face the Nation. The gist of Emanuel's statement-which is now either famous or infamous, depending on one's point of view-was that the crisis was going to embolden Obama to push through major policy initiatives at a time when the country was looking for some big ideas to solve its big problems.

In many ways, this sentiment can also be attached to the annuity business. Not long ago, the industry was being battered by unfavorable scrutiny from regulators, the media and consumers for a host of sins-some real, others perhaps unfairly attached to anyone selling an annuity. By now the criticisms are well known: The products, especially variable annuities, are thought to be too complex and expensive, and they often underperform relative to the fees they charge.

But an interesting thing has happened over the past couple of years. Media reports are increasingly highlighting the benefits of annuities, particularly their ability to help Americans convert retirement savings into guaranteed streams of income. More significant, however, has been an unexpected endorsement from the White House. A January report from the administration's Middle Class Task Force signaled that the administration would work to promote the availability of annuities and other forms of guaranteed lifetime income. In February, the Department of Labor and the Treasury Department issued a request for information about how best to encourage 401(k) plans to offer annuities to their participants. The fact that annuities are getting a second look on the heels of a deep recession and growing concerns about a retirement savings crisis is no coincidence.

"What a difference a 100-year event makes," says Bruce Ferris, executive vice president of sales and distribution for Prudential Annuities, the country's biggest seller of variable annuities, according to LIMRA. "It's not that I wish for another one but it absolutely has shone a light on where these products might be appropriate and valuable for retiring Americans. From President Obama and the Department of Labor to the media, there has been a turn to what I would call more balanced coverage."

THE NUMBERS

Of course, one high-level endorsement and a smattering of positive media coverage has not yet translated into a lovefest with annuities in this country. In fact, one could argue that we're still far from that point. Many fee-based advisors continue to shun annuities, finding them too complex or too costly. Many consumers, no doubt, feel the same. The industry must still contend with what many have dubbed the "annuity puzzle," or the lack of popularity of annuities despite the economic arguments in their favor.

"As an industry, even following post-2008, I would still give us overall as an industry a 'C' on our report card," Ferris says of the variable annuity business. "The industry is showing signs of marginal growth, but we're treading water and it's frustrating. It has not grown at the same levels as it was growing at the beginning of '03."

Ferris notes that the amount of variable annuities sold by retail advisors peaked in 2007-but it did so across all distribution channels, according to data from LIMRA. In 2007, independent advisors had a quarterly average of about $13 billion in variable annuities sold. In 2008, it dropped to roughly $10.8 billion. Last year, the quarterly average was $9.8 billion. Moreover, about $33 billion in variable annuities was sold across all distribution channels in the fourth quarter of last year. In the fourth quarter of 2007, that number was $48.1 billion. "But as we all know that was the height of the arms race and the escalation of whose product's better than whose," Ferris says. (The "arms race," as industry observers frequently refer to it, was a period of intense sales competition highlighted by the increasing use of added living benefits to sell products.)

Recent annuity sales figures are a mixed bag. The Insured Retirement Institute released a report in May showing that combined sales for fixed and variable annuities dropped 27% from the first quarter of 2009. First-quarter sales also fell 6.9% from the previous quarter. Fixed annuities, according to data from Beacon Research, had $16 billion in first-quarter sales, representing a 14.7% decline from the $19 billion it sold in the previous quarter and a 51.9% drop from the $34 billion sold in the first quarter of 2009. But variable annuities fared somewhat better. First-quarter VA sales, according to sales data from Morningstar, were at $31.4 billion, down 1.5% from the $31.9 billion it sold in the previous quarter. However, sales were up 3% from $30.4 billion in the year-earlier period.