Third Quarter Annuity Sales Remain Strong


Indexed Annuities Post Record Share of Overall Fixed Sales;

VA Sales Continue to Outpace 2009 Levels

WASHINGTON, D.C. - The Insured Retirement Institute (IRI) today announced third quarter results for the U.S. annuity industry. Indexed annuities posted a record share of overall fixed sales, representing 44% of new contracts.  Variable Annuity sales continued to outpace 2009 levels, with third quarter 2010 sales increasing by 9.7%.  Industry-wide sales posted nominal growth compared to 2009 figures.

"As consumers continue to take that second look at insured retirement strategies, we see a direct correlation to sustained interest in the products and increasing sales of annuities as a whole," said IRI President and CEO Cathy Weatherford. "The third quarter results demonstrated that variable annuity sales remain strong, with the improving market resulting in overall asset growth. On the fixed side, indexed annuities remain attractive to investors who are looking for guarantees, while having the opportunity to benefit from an upward market. Given that unretired Boomer households that are more than five years out from retiring consider 'living within a fixed income' to be their top retirement focus, the annuity industry remains poised to fill a critical void for millions of Americans."

Annuity sales for the third quarter were $53.5 billion, down slightly from $53.8 billion in the previous quarter, representing a 0.5% decrease. Year-to-year quarterly sales of annuities were up 0.5% from $53.2 billion in the third quarter of 2009.

Fixed annuity sales for the third quarter were $19.5 billion, up slightly from $19.4 billion in the previous quarter, representing a 0.3% increase. Year-to-year quarterly sales of fixed annuities were down 12.1%, declining from $22.1 billion in the third quarter of 2009.

"Sales of fixed annuities were essentially flat quarter-to-quarter.  This is puzzling because, although rates declined in third quarter, the spread between 5-year fixed annuity and Treasury rates widened, and that usually stimulates an overall sales increase," said Beacon Research President and CEO Jeremy Alexander.  "But MVA sales did grow 14% sequentially, so it seems that these annuities were the ones offering attractive rates.  Issuers may have chosen to emphasize MVA sales because market value adjustments help to insulate them from interest rate risk. Indexed annuity sales were up 4%, partly because owners could potentially earn more interest relative to fixed rates on annuities and certificates of deposit.  However, we believe indexed annuities did well mainly because of attractive lifetime income benefits, along with premium bonuses."

Variable annuity sales for the third quarter were $34 billion, down  0.1% from $34.3 billion in the previous quarter. Year-to-year quarterly sales of variable annuities were up, posting a 9.7% increase from third quarter 2009 sales of $31 billion. Third quarter 2010 net sales were $6.4 billion. There were $23.9 billion in qualified sales and $10.1 billion in non-qualified in the third quarter.

"Continuing improvement in net cash flow indicates that a reduction in exchange activity has been a major driver of below trend total sales, while also being indicative of an uptick in new money as living benefits continue to grow in popularity among retirees and pre-retirees," said Morningstar Director of Insurance Solutions Frank O'Connor

For additional data reporting, please access the PDF listed below.

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.

About Beacon Research: Beacon Research is an independent research company and application service provider founded in 1997 and based in Evanston, IL. 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. 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. 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, including Insurance Technologies' VisibleChoiceTM annuity sales platform, Ebix, Lipper, and Ibbotson Associates. Directly and through strategic alliances, Beacon information can be accessed by hundreds of financial institutions and thousands of advisors.

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 Internet, software, and print-based products and services for individuals, financial advisors, and institutions. Morningstar provides data on approximately 350,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 4 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. The company has operations in 20 countries and minority ownership positions in companies based in two other countries.

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Third Quarter Annuity Sales Remain Strong