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March 07, 2011 at 11:32 AM
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."