Overall annuity sales for the fourth quarter of 2012 were at $50.6 billion, down 4.3 percent from the previous quarter.
The Insured Retirement Institute (IRI) published the findings this week with data culled from Mornigstar, Inc. and Beacon Research.
Industry-wide sales were down 7.1 percent from the fourth quarter of last year. Total sales sat at $211.8 billion for the year down 8.4 percent from 2011, but nearly even with 2010 levels.
Fixed annuity sales totaled $16.2 billion for the fourth quarter, down 2.2 percent from the previous quarter and down 6.5 percent from the same period in 2011. Fixed annuity sales came in at $66.8 billion for the year, down 11.6 percent from 2011.
Within the fixed annuity market, the bright spot was income annuities, which experienced an increase in Q4, continuing their trend of increased sales in each of the last four quarters. Income annuity sales reached $2.38 billion for the fourth quarter — a new quarterly record. Income annuity sales for the year totaled $9.2 billion, another record. The fixed annuity market had $8.26 billion in qualified sales, $7.94 billion in non-qualified sales in the fourth quarter. For the year, there were $33.8 billion in qualified sales and $33 billion in non-qualified sales.
“The income annuity sales reflects two trends we are seeing in the market — demand and innovation. To ensure that they have guaranteed retirement income for the remainder of their lives, many consumers are turning to income annuities as a type of longevity insurance,” Cathy Weatherford, IRI President and CEO said.
Weatherford also expressed that the trend of deferred income annuities will continue in 2013. She expects them to be the fastest growing product on a percentage basis for the year.
Variable annuity (VA) sales were down 5.4 percent from the previous quarter, coming in at $34.4 billion. VA sales were down 7.7 percent from the previous year. Full-year variable annuity sales were $145 billion, down 6.5 percent from 2011 but up 5.1 percent from 2010.
VA total assets reached an all time high however, totaling $1.64 trillion during the fourth quarter, up a tick from $1.62 trillion in the third quarter of 2012 and up 9.1 percent from the fourth quarter of 2011. The VA market had $22.4 billion in qualified sales and $11.9 billion in non-qualified sales during the fourth quarter. For the year, qualified sales were at $97 billion and non-qualified sales were at $48 billion. VA net sales were negative $599 million for the fourth quarter. For the full year, new sales were $14 billion.
“Weakness in net cash flow during the fourth quarter was largely attributable to significant outflow from group contracts as an aging Baby Boomer workforce rolls out of qualified plans, said Frank O’Conner, product manager, Morningstar Annuity Research Center. O’ Conner intimated that the drop in VA sales year-over-year seems to be driven by capacity constraints of carriers rather than by a lack of demand for the product.