Deferred, Indexed Annuities Strong Despite Overall Drop in Sales: LIMRA

Guaranteed income riders drive sales increases

Annuity sales over all were down for the last quarter of 2012, but LIMRA found deferred and indexed annuities were among the most successful classes.

Total annuity sales fell 8% to $219 billion in 2012, with fourth-quarter sales of $52.6 billion, according to LIMRA’s fourth-quarter 2012 U.S. Individual Annuities Sales survey. Deferred annuity sales were over $1 billion. Fourth-quarter sales were $390 million, up from $160 million in the first quarter of 2012.

“As an emerging market, DIAs have experienced significant growth in 2012,” Joe Montminy, assistant vice president and director of LIMRA annuity research, said in a statement. “We see new companies entering this market and existing players launching new products, targeting younger boomers looking to create an income stream when they retire.”

Although deferred annuities represented less than one-quarter of total annuity sales, Montiminy predicted they would continue to show strong growth. “LIMRA estimates that collectively consumers age 45-59 have almost $10 trillion in financial assets so we anticipate these products will to continue to have remarkable growth,” he said.

Indexed annuity sales for 2012 reached a record high, according to LIMRA, of nearly $34 billion, up 5% from 2011. However, quarter-to-quarter sales fell 2% from the third quarter to over $8 billion. Guaranteed income continues to drive annuity sales. LIMRA estimates that 87% of indexed annuities sold offer GLWB riders. When such riders are available, nearly three-quarters of consumers elect them.

Other annuity categories weren’t as successful. Variable annuity fourth-quarter sales fell 8% to $35 billion, with total sales for the year down 7% to $147 billion.

“Unlike historical trends, VA sales did not follow equity market growth, which increased 13% in 2012,” Montminy said. He added that insurers removing some products from the marketplace, limiting contributions into existing contracts and revising the features and pricing on their guaranteed living benefits riders all contributed to the lower sales results for variable annuities.

Fixed annuities sales fell also, dropping 11% to a 12-year low of $72 billion in 2012. Fourth-quarter sales fell 7% to $17.6 billion.

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