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Total Annuity Sales Fell In First Quarter: IRI

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Combined sales of fixed and variable annuities fell 27% from first quarter 2009, according to the Insured Retirement Institute, Washington.

First quarter sales were also down 6.9% from the previous quarter, IRI reports.

First quarter combined sales were $47.4 billion, compared to $50.9 in fourth quarter 2009 and $64.4 billion a year ago.

The combined results are based on fixed annuity sales data from Beacon Research, Evanston, and variable annuity sales data from Morningstar, Inc., Chicago.

IRI is reporting total annuity sales data on a combined basis for the first time.

Broken down by product line, the IRI report shows the following:

–First quarter 2010 FA sales: These amounted to $16 billion, a 14.7% decline from $19 billion in the previous quarter and a 51.9% decline from $34 billion in year-earlier period. These results include sale of book value, market value adjusted, indexed and income annuities.

–First quarter 2010 VA sales: These amounted to $31.4 billion, down 1.5% from $31.9 billion in the previous quarter–but up 3% from $30.4 billion in the year-earlier period. Net sales amounted to $3.4 billion. There were $21.7 billion in qualified sales and $9.6 billion in non-qualified sales in the first quarter.

The quarter-to-quarter decline in FA sales was due mainly to lower book value and [market value adjusted] results,” says Beacon Research President Jeremy Alexander. “It appears that prospective buyers expected higher rates in the future and did not want to lock in first quarter’s credited rates.”

A year ago, FA sales hit a record high due to the safety and the strong rate advantage the products offer, “It’s not surprising that year-over-year results were down substantially,” Alexander says.

As to the VA results, Morningstar Inc. Director of Insurance Solutions Frank O’Connor says that while first quarter VA sales were off from fourth quarter, sales of products offering robust living benefit guarantees saw continued strength.

“Products offering lifetime guaranteed withdrawal benefits with value enhancers such as step-ups and bonus credits represented the lion’s share of sales,” he says.

IRI’s new combined reporting system for annuity sales provides a “holistic look” at FA and VA sales and should help identify emerging trends for all annuity product types, according to IRI President Cathy Weatherford.


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