NU Online News Service, Mar. 4, 2004, 9:40 a.m. EST – A recovering stock market boosted variable annuities sales in 2003 while falling interest rates depressed sales of fixed annuities, reports LIMRA International.[@@]

Sales of variable annuities increased 11% in 2003, to $129.2 billion, compared with $116.6 billion the year before, while sales of fixed annuities declined 15%, to $87.6 billion from the record sales of $103.3 billion set in 2002.

Overall, individual annuity sales for 2003 reached $216.8 billion, off 1% from 2002, the research organization, in Windsor, Conn., reports.

“Interest rates continued to decline, especially by midyear,” says Eric Sondergeld, corporate vice president and head of retirement research at LIMRA. “Many companies were forced to pull products where they couldn’t provide a rate above the state-mandated 3%, though many states began offering relief during the year. Also, the equity markets had a great year, which caused variable annuities to take center stage.”

VA premium placed directly into separate accounts rose in all four quarters of 2003, while VA premium placed directly into fixed accounts declined each quarter, LIMRA found. Variable immediate annuity sales declined 15% from $607 million in 2002 to $518 million in 2003.

Fixed deferred annuity sales declined each quarter, except for equity indexed annuities, whose sales increased over the year before. Fixed immediate annuity sales totaled $5 billion for the year and structured settlement premium reached $6 billion, both up slightly.

Agents, both career and independent, accounted about equally for around $82 billion in annuity sales, followed by banks at $50 billion. Stockbrokers sold some $32 billion worth, while financial planners and independent broker-dealers sold nearly $20 billion. Direct response and other channels accounted for the remainder.

The shift from fixed to variable products showed clearly in bank sales, LIMRA notes. Although banks led all other channels in fixed sales, their totals fell from $36.9 billion in 2002 to $32.9 billion in 2003. Meanwhile, banks’ VA sales rose 54%. from $11.2 billion to $17.1 billion. Banks increased their share of total annuity sales by 4%.