IRI Exclusive: Total Second Quarter Annuity Sales Post Record Highs

Variable Annuity Sales Expand at Greatest Pace since 2007; Indexed and Income Products Net Record Sales

The Insured Retirement Institute (IRI) today announced second quarter results for the U.S. annuity industry. Launched this year, IRI exclusively unites highly trusted and sought-after data from Morningstar, Inc. and Beacon Research, offering a one-of-a-kind, industry-wide overview on the state of both variable annuity and fixed annuity sales.

Annuity sales in the second quarter resulted in the strengthening of several key annuity industry indicators. Variable annuity sales posted record highs, with year-to-year sales advancing at the greatest pace since 2007. Estimated sales of both indexed and income annuities were the strongest since the Beacon study began in 2003, demonstrating the increased demand for these products.

"The second quarter data clearly demonstrates that the state of the annuity industry is strong," IRI President and CEO Cathy Weatherford said. "Of note, expansion is occurring not only across the variable side, but also within indexed and income solutions. Yet, fluctuations in the sales of specific annuity products come as little surprise as investors continue to reexamine their portfolios, making adjustments to meet both their immediate and long-term financial needs. The diversity and innovation found throughout the insured retirement industry uniquely allows consumers to identify and invest in strategies that best suit their individual needs. The movement and growth within this sales data underscores that unique flexibility investors have - and now demand - in securing their financial future."

Annuity sales for the second quarter were $53.8 billion, up from $47.4 billion in the previous quarter, representing a 13.5% increase. Year-to-year quarterly sales of annuities were down 9.8%, declining from $59.6 billion in the second quarter of 2009.

Fixed annuity sales for the second quarter were $19.4 billion, up from $16.5 billion in the previous quarter, representing a 17.7% increase. Year-to-year quarterly sales of fixed annuities were down 30.2%, declining from $27.8 billion in the second quarter of 2009.

"Sales of fixed annuities improved quarter-to-quarter for several reasons. Although rates were falling, the spread between Treasury and corporate bond yields widened. This enabled fixed annuities to offer competitive credit rates.  In addition, buyers apparently got tired of waiting for rates to rise," Beacon Research President and CEO Jeremy Alexander said. "Those reluctant to lock in the quarter's low rates purchased indexed annuities, which offered upside potential, downside protection and attractive guaranteed lifetime income."

Variable annuity sales for the second quarter were $34.4 billion, up 9% from $31.6 billion in the previous quarter. Year-to-year quarterly sales of variable annuities were up, posting an 8.2% increase from second quarter 2009 sales of $31.8 billion. Second quarter 2010 net sales were $6.2 billion. There were $23.6 billion in qualified sales and $10.7 billion in non-qualified in the second quarter.

"Variable Annuity sales reached their highest quarterly level since the 3rd Quarter of 2008, indicating that Advisors are continuing to view the product as profitable for their business and still see the potential for growth and security of the guaranteed benefits as suitable for their client's needs," said Morningstar VA Data Operations Manager Marco Chmura.  "While products may be offering less lucrative benefits than in the past, investors are still attracted to the idea of creating a floor against losses."

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