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August 25, 2011 at 08:15 AM
Second quarter fixed annuity sales overcame falling interest rates to post their second consecutive quarter-to-quarter increase. Beacon Research, which studies annuities, reports sales improved 8% from the prior quarter to $20.4 billion, and all but one product-type grew.
According to Beacon, income annuities advanced 30% to $2.3 billion and indexed annuities grew 18% to $8.4 billion. Fixed-rate MVAs rose 4% to $1.5 billion and fixed rate non-MVAs fell 5% to $8.2 billion.
“We anticipated the sequential growth in both indexed and income annuities,” Jeremy Alexander, CEO of Beacon Research, said in a statement. “Indexed annuity cap rates trended lower, but still looked good compared to the quarter’s declining fixed rates on annuities and CDs. Their guaranteed lifetime income benefits were especially attractive during a time of reduced consumer confidence. The secure personal pensions provided by income annuities were appealing for the same reason.”
Alexander added that the firm expected falling interest rates to dampen sales of both fixed rate annuity types, but yield-seeking purchasers “apparently appreciated the somewhat higher rates offered by MVAs.”
