Variable Annuity Sales Drop 4.9% In 3Q
Income Annuity Sales Set New Quarterly Record
Variable Annuity Net Sales Jump, Variable Annuity Total Net Assets Reach New Record High in Third Quarter
WASHINGTON, D.C. – The Insured Retirement Institute (IRI) today announced final third quarter 2012 sales results for the United States annuity industry, based on data reported by Morningstar, Inc. and Beacon Research. Industry-wide annuity sales for the third quarter reached nearly $52.9 billion, down 4.3 percent from $55.3 billion in the previous quarter.
Fixed annuity sales for the third quarter were buoyed by the strongest sales quarter ever for income annuities and steady indexed annuity sales, according to Beacon Research. Income annuity sales increased to nearly $2.4 billion in the third quarter, up 3.8 percent from about $2.3 billion in the second quarter and up 6.7 percent year over year from $2.2 billion in the third quarter of 2011. Indexed annuity sales totaled $8.7 billion, down just 1.2 percent from $8.8 billion in the second quarter and up 0.5 percent year over year from just under $8.7 billion in the third quarter of 2011.
“The consumer demand for income annuities has grown steadily during the past two years as consumers seek to generate a guaranteed stream of retirement income,” said Cathy Weatherford, IRI President and CEO. “The renewed attention to income annuities stems in part from a report issued last year by the U.S. Government Accountability Office, concluding that annuity ownership offers predictable income that can reduce the uncertainty that comes along with managing investments and drawing down assets. I believe this quest for certainty is helping to keep industry-wide sales relatively steady, despite the current low interest rate environment.”
Third quarter variable annuity total sales dipped 4.9 percent to $36.3 billion from $38.2 billion in the second quarter of 2012, according to Morningstar. Year over year, variable annuity total sales decreased 7.2 percent from $39.1 billion in the third quarter of 2011. Despite the decline, variable annuity net sales for the quarter increased by 44.3 percent to $5.8 billion from $4 billion during the second quarter. Within the variable annuity market, there were $24.5 billion in qualified sales and $11.8 billion in non-qualified sales during the third quarter. Variable annuity total net assets reached a new all-time high of $1.62 trillion during the third quarter of 2012, up about four percent from $1.56 trillion in the second quarter.
“The significant improvement in net sales indicates the third quarter drop in gross sales may be a function of reduced exchange activity rather than a slowing of new investment,” said Frank O’Connor, product manager, Morningstar Annuity Research Center. “The lion’s share of positive cash flow is concentrated in variable annuities offering income guarantees, which reflects continued demand for these types of products among investors in or near retirement.”
Total fixed annuity sales for the third quarter were down 3.1 percent to $16.6 billion from $17.1 billion in the second quarter of 2012. Year over year, fixed annuity sales decreased 12.8 percent from $19 billion in the third quarter of 2011. For the fixed annuity market, there were nearly $8.6 billion in qualified sales and $8.0 billion in non-qualified sales during the third quarter.
“Despite, or perhaps because of low interest rates to some extent, income annuity sales are growing and indexed annuities are holding their own,” Beacon Research President Jeremy Alexander said. “Income annuity payouts look attractive relative to the conservative alternatives. That’s especially true for deferred income annuities, which provided most of the sequential increase in total income annuity sales. Indexed annuity premium bonuses and guaranteed lifetime withdrawal benefits also look pretty good in the current low rate environment.”
For complete annuity sales reporting data, please access the PDF version of this release.
About Morningstar, Inc.: Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for individuals, financial advisors, and institutions. Morningstar provides data on more than 385,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 8 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its registered investment advisor subsidiaries and has approximately $195billion in assets under advisement or management as of Sept. 30, 2012. The company has operations in 27 countries.
About Beacon Research:Beacon Research is an independent research company and application service provider founded in 1997 and based in Evanston, Ill. Beacon tracks fixed and variable annuity features, rates and sales. Its quarterly Fixed Annuity Premium Study is the first and only source to analyze fixed annuity sales at the product level, and the first to make a decade’s worth of sales information available to subscribers online at www.annuitymarketstudy.com. Beacon lowers compliance risk and increases fixed annuity sales with 100% carrier-approved, comprehensive product profiles, spreadsheets and search tools for the advisor/rep websites of banks, TPMs, broker-dealers and marketing organizations. Carriers and financial institutions use its systems at www.annuitynexus.com for compliance review of 1035 exchanges, sales support, conservation and product research. Beacon also licenses information to other platforms. Directly and through licensees, Beacon information can be accessed by hundreds of financial institutions and thousands of advisors.
About the Insured Retirement Institute:The Insured Retirement Institute (IRI) is a not-for-profit organization that for twenty years has been a mainstay of service, commitment and collaboration within the insured retirement industry. Today, IRI is considered to be the authoritative source of all things pertaining to annuities, insured retirement strategies and retirement planning. IRI proudly leads a national consumer education coalition of nearly twenty organizations and is the only association that represents the entire supply chain of insured retirement strategies: our members are the major insurers, asset managers, broker dealers and more than 150,000 financial professionals. IRI exists to vigorously promote consumer confidence in the value and viability of insured retirement strategies, bringing together the interests of the industry, financial advisors and consumers under one umbrella. IRI’s mission is to: encourage industry adherence to highest ethical principles; promote better understanding of the insured retirement value proposition; develop and promote best practice standards to improve value delivery; and to advocate before public policy makers on critical issues affecting insured retirement strategies and the consumers that rely on their guarantees. Visit www.IRIonline.org today to experience the vast resources of the Insured Retirement Institute for yourself.
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