June 2, 2011

Fixed Annuity Sales Up for First Time in Two Years

Quarter-to-quarter sales up 7%

Data released Thursday by Beacon Research found fixed annuity sales were finally turning around. In the first quarter of 2011, fixed annuities posted their first period-to-period increase in two years with a 6% increase to almost $19 billion.

Overall sales improved 7% from the fourth quarter of 2010, but indexed and income annuities were down 15% and 7%, respectively. Book value sales rose 42% and MVAs increased 7%.

“Fixed rate annuities benefitted from higher rates in first quarter,” Jeremy Alexander, CEO of Beacon Research, said in a press release. “They had a strong rate advantage over CDs in many banks.  The steep yield curve made longer term rates particularly attractive and sales moved longer as a result."

Book value annuities and market value-adjusted products showed the greatest increases at 12% and 7%, respectively. Income annuities and indexed annuities each increased less than 1%.

"Indexed annuities apparently lost sales to both fixed rate and variable annuities, while income annuities’ sequential decline was partly seasonal," Alexander added.

There was quite a shake-up in the top providers in the annuity industry in the first quarter. Western National Life moved up four slots to the top position with over $2 billion in sales. New York Life also moved up, knocking Allianz to the No. 3 position. American Equity and Aviva round out the top five providers.

While New York Life brought in just under $1.9 billion in sales, its NYL Secure Term Fixed Annuity was the most popular product overall, and was especially popular among captive agents and large or regional broker-dealers. The second most popular product, Allianz's MasterDex X was preferred by independent producers. Independent broker-dealers preferred MassMutual's RetireEase income annuity.

“Looking ahead, falling interest rates are likely to dampen fixed rate annuity sales in the near-term but may help indexed annuities.  Income annuity results are likely to strengthen gradually due to growing demand for lifetime income and that will support indexed products with guaranteed lifetime withdrawal benefits as well,” Alexander said.

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