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3Q Annuity Sales At Highest Level In 2 Years

WASHINGTON, D.C. – The Insured Retirement Institute (IRI) today announced final third-quarter 2013 sales results for the U.S. annuity industry, based on data reported by Morningstar, Inc. and Beacon Research. Bolstered by the highest fixed annuity sales since the second quarter of 2009, industry-wide annuity sales reached $57.5 billion during the third quarter of 2013 – a 5.5 percent increase from $54.5 billion in the previous quarter and an 8.7 percent increase from $52.9 billion in the third quarter of 2012.

Fixed annuity sales totaled $22.5 billion, rising 31 percent from $17.1 billion in the second quarter of 2013 and 35.2 percent from $16.6 billion in the third quarter of 2012, according to Beacon Research. Within the fixed annuity market, sales of all product types increased from both the previous quarter and the third quarter of 2012.

“Industry-wide annuity sales are at their highest mark in two years,” said Cathy Weatherford, IRI President and CEO. “Strong sales were supported by a surge in sales of fixed annuities. From the first quarter to the third quarter, we’ve seen fixed annuity sales rise 50 percent. During this time, interest rates have increased steadily. As a result of this more favorable environment, demand for lifetime income has gone from sustaining sales to driving measurable growth across the industry.”

According to Morningstar, variable annuity total sales during the third quarter of 2013 were $35.1 billion, down 5.9 percent from $37.3 billion in the previous quarter and down 3.3 percent from $36.3 during the third quarter of 2012. Variable annuity net sales during the third quarter were $1.52 billion, down 7.9 percent from $1.65 billion during the previous quarter. Variable annuity net assets reached a new record high of $1.79 trillion, a 4.1 percent increase from $1.72 trillion in the second quarter of 2013. Within the variable annuity market, there were $22.8 billion in qualified sales and $12.2 billion in non-qualified sales during the quarter.

“Assets surged on positive performance, and net sales stayed above water despite continued heavy outflows,” said Frank O’Connor, Morningstar Annuity Intelligence Product Manager. “We’re seeing strong demand for all stripes of variable annuity products, both with and without income guarantees.”

According to Beacon Research, fixed annuity sales of $22.5 billion – the highest fixed annuity sales since the second quarter of 2009 – were supported by strong sales of all product types. Indexed annuity sales set a new record high during the third quarter, reaching nearly $10.1 billion. Indexed annuity sales rose 10.3 percent from $9.1 billion during the second quarter of 2013 and 15.1 percent from $8.7 billion in the third quarter of 2012. Income annuity sales also set a new quarterly record. Income annuity sales topped $2.8 billion, a 10.1 percent increase from nearly $2.6 billion in the second quarter of 2013 and an 18.6 percent increase from nearly $2.4 billion in the third quarter of 2012.

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Book value and market value adjusted fixed annuities also made gains in sales during the third quarter. Book value fixed annuity sales rose above $7.1 billion, up 71.1 percent from nearly $4.2 billion in the second quarter of 2013 and up 60.6 percent from $4.4 billion in the third quarter of 2012. Market value adjusted fixed annuity sales reached nearly $2.5 billion, an 88.1 percent increase from $1.3 billion in the previous quarter and a 131.5 percent increase from nearly $1.1 billion in the third quarter of 2012. For the fixed annuity market, there were $10.1 billion in qualified sales and $12.4 billion in non-qualified sales during the third quarter.

“Fixed annuity sales growth during third quarter was attributable largely to some of the highest interest rates and spreads we’ve seen in more than a year,” said Beacon Research President Jeremy Alexander. “The one-year versus 10-year Treasury rate spread increased more than 100 basis points since the end of 2012, and credit spreads are rising, which enabled carriers to raise the credited rates on their products.”

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 approximately 433,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on nearly 10 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 more than $166 billion in assets under advisement and management as of June 30, 2013. 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 the leading association for the retirement income industry. IRI proudly leads a national consumer coalition of more than 20 organizations, and is the only association that represents the entire supply chain of insured retirement strategies. IRI members are the major insurers, asset managers, broker-dealers/distributors, and 150,000 financial professionals. As a not-for-profit organization, IRI provides an objective forum for communication and education, and advocates for the sustainable retirement solutions Americans need to help achieve a secure and dignified retirement. Learn more at www.irionline.org.

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