Variable Annuity Costs Fell in Second Quarter, IRI Report Finds

Almost every share class experienced reduction in fees

A report released Tuesday, August 31, from the Insured Retirement Institute found the cost of variable annuities fell in the second quarter of 2010. According to the report, the average fee fell four basis points, and every share class showed a reduction in price except for A-shares.

B-shares, the most common share class sold, have an average cost of 1.24%.

"The decrease in cost of variable annuities has directly contributed to substantial growth for the industry, with year-to-year sales advancing at the greatest pace since 2007," IRI President and CEO Cathy Weatherford said in a press release.

An IRI report earlier this month showed variable annuity sales increased 9% in the in the second quarter, and 8% from the second quarter of 2009.

Tuesday's report noted that independent broker/dealers accounted for 48% of sales in the second quarter, up 2.3% from the first quarter. Regional broker/dealers also increased annuity sales, representing 10.5% of sales. Sales from wirehouses fell, however, dropping to 6.8% from 9.6% in the first quarter.

Over half of sales included annuities with single life guaranteed minimum withdrawal benefits.

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