Quarter-to-Quarter Variable Annuity Sales Improve in Q1 2013

Variable Annuity Net Sales Return to Positive, Net Assets Grow to New Record 

WASHINGTON, D.C. – The Insured Retirement Institute (IRI) today announced final first-quarter 2013 sales results for the United States annuity industry, based on data reported by Morningstar, Inc. and Beacon Research. Industry-wide annuity sales for the first quarter reached nearly $49.6 billion, down 2.0 percent from $50.6 billion in the previous quarter and down 6.6 percent from $53.1 billion in the first quarter of 2012. 

Variable annuity total sales topped $34.6 billion in the first quarter of 2013, according to Morningstar. This is a 0.6 percent increase from $34.4 billion in the fourth quarter of 2012, but down 4.4 percent from $36.2 billion in the first quarter of 2012. Variable annuity net sales also showed improvement in the first quarter, returning positive and reaching $900 million after posting a negative $599 million in the fourth quarter of 2012. 

“The quarter-to-quarter improvement in VA sales is a positive sign for a dynamic industry,” said Cathy Weatherford, IRI President and CEO. “The swing back to positive growth in net sales is similarly a step in the right direction, albeit with room for further improvement. It’s worth noting, however, that net flows have been largely affected by outflows from group contracts as a result of an aging workforce rolling out of qualified plans. This reflects the demographic reality that there is a population spike entering their retirement years, bringing with it the opportunity for the industry to deliver retirement income to these consumers.” 

Fixed annuity sales for the first quarter of 2013 totaled nearly $15 billion, down 7.7 percent from $16.2 billion in the fourth quarter of 2012 and down 11.7 percent from sales of more than $16.9 billion in the first quarter of 2012, according to Beacon Research. For the fixed annuity market, there were $8.21 billion in qualified sales and $6.75 billion in non-qualified sales during the first quarter. 

“The difficult interest rate environment continued to take its toll on fixed annuity sales in first quarter,” said Beacon Research President Jeremy Alexander. “But deferred income annuities were a bright spot – up 150 percent from a year ago.” 

According to Morningstar, variable annuity total net assets reached a new all-time high of nearly $1.72 trillion in the first quarter of 2013, up 4.6 percent from $1.64 trillion in the fourth quarter of 2012 and up 6.5 percent from $1.61 trillion in the first quarter of 2012. Within the variable annuity market, there were $22.77 billion in qualified sales and $11.86 billion in non-qualified sales during the first quarter. 

“What we find striking in the asset class breakdown is the extent to which variable annuity assets are invested in allocation funds, a trend driven by the common requirement to invest in such funds when electing an income guarantee,” Frank O’Connor, product manager, Morningstar Annuity Research Center, said. “Five years ago, allocation funds represented just 12 percent of total VA assets but have risen steadily to more than 30 percent today.”

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 422,000 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 $157 billion in assets under advisement or management as of March 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 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 www.IRIonline.org today to experience the vast resources of the Insured Retirement Institute for yourself.

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