New Variable Annuity Sales Post Double-Digit Increase in 2010


Contract Costs Remain Steady, As a Swing Toward More Generous Benefits Continues

WASHINGTON, D.C. - The Insured Retirement Institute (IRI) today released a report on product trend updates within the U.S. variable annuity market. Compiled by Morningstar, the report found that sales flows picked up in calendar year 2010, with a 10.3% increase in new sales.  Full year new flows were $136.6 billion in 2010 compared to $123.9 billion in 2009.  With assets reaching an all-time high of $1.5 trillion, the variable annuity industry has surpassed the pre-crisis levels of the third quarter of 2007.

Of note, despite the ongoing innovation and ratcheting up of benefits, variable annuity contract costs have remained steady over the past five years when measured as industry averages.  Total average expenses in 2006 were 2.51, compared to the 2010 fourth quarter average of 2.49. Carriers moderated their product innovation efforts, with new benefit designs sticking to tried and true step up methods, and withdrawal percentages staying in the 5% range.

"The growth in new sales clearly demonstrates that consumers increasingly recognize the unique value only an annuity can bring to a well balanced portfolio," said IRI President and CEO Cathy Weatherford.  "The industry is in an upward trajectory, one that directly benefits consumers through product innovation and generous benefits, without an increase in contract costs. While this is an early snapshot on what 2011 may bring, I am confident that shift toward richer benefits will continue throughout the year."

Overall, carriers filed 49 changes in the first quarter, compared to 64 in the previous quarter. Living benefit activity continued at a strong pace. The Lifetime GMWB continues to be the living benefit of choice among product developers and those distributing VAs. All 13 living benefits released in Q1 2011 were designed as lifetime withdrawal riders.

The entire report and analysis can be found here.

About the Insured Retirement Institute: The Insured Retirement Institute (IRI) is a not-for-profit organization and is the authoritative source of all things pertaining to annuities, insured retirement strategies and retirement planning. 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. Visit www.IRIonline.org to experience the new, vast resources of the new Insured Retirement Institute for yourself.                 

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