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March 16, 2009 at 08:00 PM
Individual fixed annuity sales in the United States increased 50% in 2008, reaching $109.4 billion (see Table 1). 
These record-setting results for fixed annuities were more than enough to offset the 15% decline in variable annuity sales and enabled total individual annuity sales to increase modestly over 2007.
While the dramatic events starting in the latter part of 2008 weigh heavily on the economy, the market conditions affecting annuity sales actually began to unfold in the second half of 2007.
Beginning in the summer of 2007, short-term interest rates began dropping while long-term interest rates remained steady, creating an increasingly favorable yield curve for fixed annuities by the 4th quarter of 2007. In October 2007, the equity markets peaked and then began their long decline.
By mid-2008, the sales results confirmed what the improving yield curve and equities market environment foreshadowed: skyrocketing fixed annuity sales with dropping variable annuity sales.
This pattern last occurred on an annual basis in 2001. The following year, FA sales reached their zenith at $103.3 billion. VA sales also increased in 2002, despite a continuing drop in equity markets, as new guaranteed living benefit riders were introduced. 
Overall election rates for GLBs rose during 2008, driven by growing election rates for guaranteed lifetime withdrawal benefit (GLWB) riders. GLWB election rates improved each quarter, reaching 58% in the 4th quarter, according to data from LIMRA’s quarterly Variable Annuity Guaranteed Living Benefit Election Tracking Survey. The guaranteed minimum income benefit (GMIB) rider was also popular, with election rates fluctuating between 32%-36%. Election rates for guaranteed minimum withdrawal benefits (GMWBs) and guaranteed minimum accumulation benefits (GMABs) were less than 10% throughout 2008.
The GLB riders are selling well among individuals in their early 60s, a demographic that coincides with the leading edge of baby boomers. For living benefits, the risk to carriers might be considered greater than the risk associated with death benefits. Only a very small percentage of annuity contract holders die in any given year, and mortality rates are likely to follow expected patterns, while contract holders with GMWBs or GLWBs can initiate withdrawals anytime. There is little data available to predict how these consumers will behave in volatile market conditions.
Fixed annuity sales are comprised of the following product types: deferred book value annuities, deferred market value adjusted (MVA) annuities, indexed annuities, fixed immediate annuities and structured settlements.
Fixed annuity sales increased for all product types in 2008. The competitive interest rates offered by FAs, in addition to the market volatility experienced in 2008, made FAs an attractive alternative for consumers looking for retirement products that can offer safety and guarantees.
Fixed-rate (book value and MVA) annuity assets grew mostly due to positive earnings. Indexed annuity assets grew mostly due to inflows exceeding outflows. VA inflows also exceeded outflows; however, VA assets dropped 24% due to a significant decline in investment earnings, down $388 billion, due to the decline in the equities market.
Overall, deferred annuity assets under management fell 16% during 2008, falling from $2 trillion to $1.7 trillion (see Table 2). 
