Fed predicts low rates to continue through 2014
WINDSOR, Conn., – Total annuity sales increased eight percent in 2011, compared to 2010, to reach $240.3 billion, according to LIMRA’s fourth quarter 2011 U.S. Individual Annuities Sales survey, which represents data from 94 percent of the market.
“While we saw significant growth in the first half of 2011, third and fourth quarter annuity sales fell quarter-over-quarter, tempering the double-digit growth seen at the mid-year mark,” said Joseph Montminy, LIMRA assistant vice president, annuity research. “In this economic environment, VA companies are carefully managing the risks associated with their guaranteed living benefit riders, which has had an impact on overall sales trends.”
In the fourth quarter, total annuity sales dropped slightly to $57.4 billion.
After six consecutive quarters of positive growth when compared to the prior year, fourth quarter VA sales were flat; and compared to the prior quarter, VA sales were down four percent, totaling $38.4 billion. However, overall VA sales sustained 13 percent growth in 2011, growing to $159.3 billion, which exceeds total VA sales from 2008.
Total fixed annuity sales were $19.0 billion, falling two percent in the fourth quarter. In 2011, fixed annuities slipped one percent, to reach $81.0 billion. With the Federal Reserve stating it will keep interest rates low through 2014, we expect quarterly fixed annuity sales to remain between $18-22 billion in 2012.
Indexed annuity sales remained relatively steady, up one percent in the fourth quarter, compared to prior year, to reach $8.3 billion but down five percent from the prior quarter. Year-to-date, indexed annuities were flat compared to 2010, totaling $32.2 billion. For the second consecutive quarter, indexed annuity sales outperformed sales of traditional fixed annuities (book-value and market-value adjusted), capturing 44 percent of the fixed annuity market.
Fixed immediate annuity sales were a record breaking $8.1 billion in 2011, up seven percent from 2010. In the fourth quarter, immediate annuities grew six percent in the fourth quarter, compared to prior year, to reach $1.9 billion. “The demographics of the U.S. population cannot be ignored. There are currently more than 42 million retirees in the U.S. and the number is expected to grow to 65 million by 2025,” added Montminy. “Many of these retirees need to establish a guaranteed income stream that immediate annuities can provide. We anticipate demand for this product will grow for many years to come.”
Book-value sales dropped five percent in the fourth quarter, to reach $6.3 billion. In 2011, book-value sales were $30.4 billion, level with sales from 2010. Market-Value Adjusted (MVA) sales fell 14 percent in the fourth quarter, to $1.2 billion. Total MVA sales in 2011 were $5.2 billion, dropping 15 percent compared to 2010.
A list of the top 20 writers of overall total annuities, variable annuities and fixed annuities ranked by third quarter 2011 sales results, as well as the fourth quarter Annuities Industry Estimates chart, can be found here.