Workers expect their defined contribution plans to play a greater role in their retirement income than annuities.
WASHINGTON, D.C. – The Insured Retirement Institute (IRI) today announced final fourth-quarter and year-end 2013 sales results for the U.S. annuity industry, based on data reported by Morningstar, Inc. and Beacon Research. Increased fixed and variable annuity total sales during the fourth quarter pushed industry-wide sales to $59.3 billion, up 3.1 percent from 2013 third-quarter sales of $57.5 billion and up 17.2 percent from 2012 fourth-quarter sales of $50.6 billion. For the full year, industry-wide sales increased 4.2 percent to $220.9 billion from $212 billion during the previous year.
Fixed annuity sales continued their upward momentum during the fourth quarter reaching $23.5 billion, according to Beacon Research. This was a 4.7 percent increase from nearly $22.5 billion in third-quarter 2013 and a 45.2 percent increase from $16.2 billion in fourth-quarter 2012. For the full-year 2013, fixed annuity sales totaled $78.1 billion, a 16.6 percent increase from $67 billion in 2012.
Variable annuities total sales also were on the rise during the fourth quarter, according to Morningstar. Variable annuities total sales climbed to $35.8 billion, a 2 percent increase from $35.1 billion in third-quarter 2013 and a 4.1 percent increase from $34.4 billion in fourth-quarter 2012. For the full-year 2013, variable annuity total sales dipped 1.5 percent to $142.8 billion from $145 billion in 2012.
“Supported by a resurgence in fixed annuity sales, industry-wide sales continue to move higher,” said Cathy Weatherford, IRI President and CEO. “It’s particularly noteworthy that income annuities continue to break new barriers, passing the $3 billion mark for the first time and reaching $3.5 billion. The growing popularity of these products shows the expanding market of consumers looking for certainty through guaranteed lifetime income. As the Baby Boomers continue to retire, we expect this demand to remain strong.”
According to Beacon Research, strong fixed annuity sales during the fourth quarter of 2013 were driven by quarter-to-quarter increases in the sale of indexed and income annuities. Income annuity sales rose 23.3 percent to $3.5 billion from $2.8 billion in the third quarter – eclipsing the $3 billion sales mark for the first time. Meanwhile, indexed annuity sales rose 17 percent to $11.8 billion from under $10.1 billion in the third quarter. For the full year, the 16.6 percent growth in sales was supported by sales increases in all types of fixed annuity products, with market value adjusted (MVA) annuity sales leading the way. MVA annuity total sales reached $6.7 billion in 2013, a 41.4 percent increase from under $4.8 billion in 2012. For the fixed annuity market, there were approximately $11.5 billion in qualified sales and $12 billion in non-qualified sales during the fourth quarter. For the year, there were approximately $38.9 billion in qualified sales and $39.2 billion in non-qualified sales.
“The fixed annuity industry had its best year since 2009,” said Beacon Research President Jeremy Alexander. “Average credited rates increased 40 basis points during 2013 and, for the first time, there were year-over-year increases in sales of all types of fixed annuities.”
[Click here to access complete fixed annuity sales data in the PDF version of this release.]
According to Morningstar, variable annuity net assets reached a new all-time high of $1.87 trillion at the close of 2013. Variable annuity net sales were negative for the fourth quarter, coming in at -$2.8 billion, but were positive for the year at $1.3 billion. Within the variable annuity market, there were $23.5 billion in qualified sales and $12.3 billion in non-qualified sales. For the full-year 2013, there were $92.9 billion in qualified sales and $49.9 billion in non-qualified sales.
“Continued heavy redemption activity in group qualified plans drove down net flows, while demand for individual products remained relatively steady,” said Frank O’Connor, Morningstar Annuity Intelligence Product Manager.
[Click here to access complete variable annuity sales data in the PDF version of this release.]
About Morningstar, Inc.: Morningstar, Inc. offers an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. Morningstar provides data on approximately 446,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 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 had approximately $159 billion in assets under advisement and management as of Dec. 31, 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.