Quarterly Sales Increase across Annuity Industry

Total and Net Variable Annuity Sales Growth Leads to Strong Quarter

Increased Demand for Income and Indexed Annuities Push Fixed Sales Higher

WASHINGTON, D.C. - The Insured Retirement Institute (IRI) today announced final second-quarter 2012 sales results for the United States annuity industry, based on data reported by Morningstar, Inc. and Beacon Research. Industry-wide annuity sales for the second quarter were up 4.1 percent to nearly $55.3 billion from $53.1 billion during the previous quarter.

Variable annuities led the growth of overall sales with an increase of 5.4 percent to nearly $38.2 billion from $36.2 billion in the first quarter of 2012, according to Morningstar. Year over year, total variable annuity sales dipped 4.5 percent from just under $40 billion during the second quarter of 2011. Net variable annuity sales for the quarter increased by 5.7 percent to more than $4 billion compared to $3.8 billion during the first quarter.

"Right now the demand for annuities is outweighing headwinds from low interest rates," said Cathy Weatherford, IRI President and CEO. "We know that interest rates will remain low for the foreseeable future and that market participants will be reevaluating and readjusting their product offerings. But at the same time, we cannot discount the fact that retirement as we know it has fundamentally changed. Today Baby Boomers are retiring en masse and looking for effective drawdown strategies. They are looking for retirement income, and they are looking for certainty. Right now they are finding it with insured retirement strategies."

Fixed annuity sales for the second quarter were up 1 percent to $17.1 billion from $16.9 billion during the first quarter of 2012, according to Beacon Research. There were about $8.7 billion in qualified sales and $8.4 billion in non-qualified sales during the second quarter.

Within the fixed annuity market, indexed annuity second-quarter sales were up 8.3 percent from first-quarter levels. The income annuity segment also continues to grow as second-quarter sales rose 6.1 percent from first-quarter levels.

"Indexed annuity cap rates were attractive relative to the fixed rates available on other conservative alternatives. This, along with demand for their guaranteed lifetime withdrawal benefits, helped boost second quarter indexed annuity sales to near-record levels," said Beacon Research President Jeremy Alexander. "Income annuities had their second-best quarter ever as well. These products also benefitted from demand for guaranteed lifetime income, with deferred income annuities showing particularly strong growth."

According to Morningstar, variable annuity net assets dipped 3.2 percent to $1.56 trillion from an all-time high of $1.61 trillion during the first quarter of 2012. Year-over-year, variable annuity net assets remained steady-down just 0.6 percent from $1.57 trillion during the second quarter of 2011. There were $25.8 billion in qualified sales and $12.4 billion in non-qualified sales in the second quarter.

"While sales in the first half of 2012 were 6 percent lower than in the first half of 2011, they were almost 12 percent higher than the same period in 2010, indicating strengthened but leveling product demand," said Frank O'Connor, Morningstar Director of Insurance Solutions. "Net cash flow was down 51 percent over the same period and it is unclear yet if this was an anomalous period, or representative of a 'new normal' in cash flows as we see retirees begin to draw income from the $1.5 trillion in aggregate account balances."

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 more than 385,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 8 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 investment management subsidiaries and has more than $186 billion in assets under advisement or management as of June 30, 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 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 to advocate before public policy makers 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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Contact:
Andrew Simonelli
asimonelli@irionline.org


Quarterly Sales Increase across Annuity Industry