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Variable Annuities Set Asset Record in 2010: IRI

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The Insured Retirement Institute announced Monday that in 2010, variable annuities reached $1.5 trillion in assets, an "all-time record." Fourth-quarter sales rose 18% over 2009 sales to over $37 billion.

"The rebound in sales activity was largely driven by positive results in equity markets," Frank O'Connor, director of insurance solutions for Morningstar, said. "Performance increased on the continued appeal of guarantees," he added.

"Sales rebounded, but there are things in those numbers that aren't as positive," he cautioned, specifically low levels of new cash flow.

"Net new cash flow is about 15% of total sales," he said, "indicating the fresh high in assets is a factor of  market improvements," rather than an increase in annuities sold by advisors and purchased by investors.

"The annuity industry ended 2010 on strong and secure footing, with fourth quarter sales reaching the highest levels of the entire year," said IRI President and CEO Cathy Weatherford, in a statement. "Variable annuity assets reached record levels, definitively demonstrating to consumers the value and significance that this investment can play in their overall retirement savings strategy."

While variable annuities had a record year, overall annuity sales fell from $229 billion in 2009 to $209 billion in 2010. Fourth-quarter sales increased 5.7% over fourth-quarter sales in 2009 to $54.3 billion.

Sales of fixed annuities fell more than 31.2% in 2010 to $71.7 billion, compared to $104.2 billion in 2009. Year-to-year quarterly sales fell 14.3% to over $16 billion in the fourth quarter of 2010. Weatherford noted that sales of fixed annuities in 2009 were "near record setting," and was unsurprised by the drop.

"As consumers increasingly turn to insured retirement strategies for guaranteed retirement income, 2011 will offer an unprecedented opportunity for the financial industry to help millions of Americans attain a secure financial future," Weatherford added.