Individual annuity sales dropped 3% year-to-date through September 2005 when compared to the same period in 2004.

The overall total of $162.5 billion was comprised of $101.8 billion in variable annuity sales and $60.7 billion in fixed annuity sales, according to new figures from LIMRA International, Windsor, Conn.

VA sales improved 1% year-to-date following a 13% increase in the third quarter. Fixed annuity sales dropped significantly in the third quarter, down 24% compared to 3Q 2004, and down 8% year-to-date.

Fixed annuity sales had held steady through the first half of 2005 due mainly to the sharp increase in sales of equity-indexed annuities, while book value and market value adjusted sales had decreased. However, in the third quarter, EIA sales dropped 3% compared to 3Q 2004, and every category of fixed annuity except immediate annuities saw 3Q sales fall.

Year-to-date, EIA sales are up 27% and fixed immediate sales up 8%, while structured settlements decreased 2%, book value sales dropped 23% and MVA sales fell 31%.

Persistency among fixed contracts worsened again; annualized surrender rates rose slightly to 6.5% from 6.4% in the second quarter. The year-to-date annualized contract surrender rate increased 16% over the comparable rate in 2004. On a cash value basis, year-to-date surrender rates were 5.8%.

Among fixed annuities that exited the surrender charge period, annualized surrender rates were 9.4% compared to 4.1% among contracts with surrender charges. This jump in surrender rates was more pronounced among contracts sold through banks, wirehouses and independent financial planners than among career agent-sold contracts.

Sales, along with growth of in-force assets, were sufficient to offset any losses from surrenders in 2005: fixed deferred annuity assets reached $552 billion by September, up almost 4% since the end of 2004. Asset growth within qualified contracts was better than growth within nonqualified contracts, 4.6% vs. 2.2%, respectively.

Dan Beatrice and Joseph Montminy conduct annuity research in LIMRA International’s Retirement Research Center, Windsor, Conn. Their respective e-mail addresses are: dbeatrice@limra.com and jmontminy@limra.com.

The overall total was $163 billion, with $102 billion in variable annuities and $61 billion in fixed annuities