Income Annuity Sales Continue to Climb into Record Territory

Variable Annuity Net Assets Grow to Record of Nearly $1.64 Trillion

WASHINGTON, D.C. – The Insured Retirement Institute (IRI) today announced final fourth quarter and year-end 2012 sales results for the United States annuity industry, based on data reported by Morningstar, Inc. and Beacon Research. Overall sales trended downward compared with 2011, but were relatively even with 2010 levels. Sales results also show that income annuities, which continued their record sales streak during the fourth quarter, remain in high demand as consumers look to generate guaranteed lifetime income.

Industry-wide annuity sales for the fourth quarter reached nearly $50.6 billion, down 4.3 percent from $52.9 billion in the previous quarter and down 7.1 percent from $54.5 billion in the fourth quarter of 2011. For 2012, industry-wide sales totaled $211.8 billion, down 8.4 percent from $231.1 billion in 2011, but relatively close to 2010 sales of $214.7 billion.

Within the fixed annuity market, income annuity sales increased slightly for the quarter, adding to the record run for the product class. According to Beacon Research, income annuity sales have now increased in each of the last four quarters, reaching $2.38 billion during the fourth quarter—a new quarterly record. This is a 0.3 percent increase from third quarter sales of $2.37 billion and a 7.2 percent increase from $2.22 billion in the fourth quarter of 2011. Income annuity sales for the year reached nearly $9.2 billion, also a new record. This is an 8.5 percent increase from just under $8.5 billion during 2011. 

“The continued growth in income annuity sales reflects two trends that we are seeing in the market—demand and innovation,” said Cathy Weatherford, IRI President and CEO. “To ensure that they have guaranteed retirement income for the remainder of their lives, many consumers are turning to income annuities as a type of longevity insurance. To meet this demand, more and more companies continue to innovate and develop new products. We are seeing this now with the growth of deferred income annuity (DIA) product offerings. We anticipate that this growth will lead DIAs to be the fastest growing product on a percentage basis in 2013 and will contribute to strong income annuity sales during the next year.” 

Fourth quarter 2012 variable annuity sales totaled nearly $34.4 billion, down about 5.4 percent from $36.3 billion in the third quarter of 2012 and down approximately 7.7 percent from $37.2 billion in the fourth quarter of 2011, according to Morningstar. For the full year 2012, variable annuity sales totaled $145 billion, down 6.5 percent from $155.5 billion in 2011, and up 5.1 percent from $138.3 billion in 2010. 

Variable annuity total net assets reached a new all-time high of nearly $1.64 trillion during the fourth quarter of 2012, up slightly from $1.62 trillion in the third quarter of 2012 and up 9.1 percent from $1.5 trillion in the fourth quarter of 2011. Within the variable annuity market, there were $22.4 billion in qualified sales and $11.9 billion in non-qualified sales during the fourth quarter. For the year, there were $97 billion in qualified sales and $48 billion in non-qualified sales. Variable annuity net sales for the fourth quarter were negative $599 million. For the full year, net sales still reached $14 billion. 

“Weakness in net cash flow during the fourth quarter was largely attributable to significant outflows from group contracts as an aging Baby Boomer workforce rolls out of qualified retirement plans,” said Frank O’Connor, product manager, Morningstar Annuity Research Center. “Meanwhile, the drop in sales year over year appears driven more by capacity constraints and carrier exits than by reduction in demand for the products, as evidenced by strong sales reported from companies offering lifetime income guarantees.”

Fixed annuity sales for the fourth quarter totaled $16.2 billion, down 2.2 percent from third-quarter sales of nearly $16.6 billion and down 6.5 percent from $17.3 billion during the same period in 2011, according to Beacon Research. For the year, fixed annuity sales totaled $66.8 billion, down 11.6 percent from nearly $75.6 billion in 2011. For the fixed annuity market, there were $8.26 billion in qualified sales and approximately $7.94 billion in non-qualified sales during the fourth quarter. For the year, there were $33.8 billion in qualified sales and $33 billion in non-qualified sales.

“Income annuity sales have increased for three consecutive years,’ said Beacon Research President Jeremy Alexander. “These products had record-high sales in 2012, and this growth was driven by DIAs. Indexed annuity sales also hit a record high in 2012, though results declined a bit from third to fourth quarter. Beacon expects that demand for retirement income will help both income and indexed annuities set new sales records in 2013.” 

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 approximately 416,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 9 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 $149 billion in assets under advisement or management as of Dec. 31, 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  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 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 advocate before public policymakers on critical issues affecting insured retirement strategies and the consumers that rely on their guarantees. Visit today to experience the vast resources of the Insured Retirement Institute for yourself.

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Andrew Simonelli

Income Annuity Sales Continue to Climb into Record Territory