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LIMRA: Annuity Sales Topped $240 Billion in 2011

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Annuity sales reached $240.3 billion in 2011, an 8% increase compared to 2010, according to a new report.

LIMRA, Windsor, Conn., disclosed this finding in its fourth quarter 2011 U.S. Individual Annuities Sales survey, which represents data from 94% of the market.

In the fourth quarter, total annuity sales dropped slightly to $57.4 billion, says LIMRA. After six consecutive quarters of positive growth when compared to the prior year, fourth quarter VA sales were flat, says LIMRA. And compared to the prior quarter, VA sales were down four percent, totaling $38.4 billion.

But overall VA sales sustained 13% growth in 2011, growing to $159.3 billion, which exceeds total VA sales from 2008.

Total fixed annuity sales were $19.0 billion, falling two percent in the fourth quarter. In 2011, fixed annuities slipped one percent, to reach $81.0 billion. Because the Federal Reserve states it will keep interest rates low through 2014, LIMRA says it expects quarterly fixed annuity sales to remain between $18 billion and $22 billion in 2012.

Indexed annuity sales remained relatively steady, up one percent in the fourth quarter, compared to prior year, to reach $8.3 billion but down five percent from the prior quarter. Year-to-date, indexed annuities were flat compared to 2010, totaling $32.2 billion.

For the second consecutive quarter, indexed annuity sales outperformed sales of traditional fixed annuities (book-value and market-value adjusted), capturing 44% of the fixed annuity market, LIMRA says.

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Fixed immediate annuity sales were a record breaking $8.1 billion in 2011, up seven percent from 2010. In the fourth quarter, immediate annuities grew six percent in the fourth quarter, compared to prior year, to reach $1.9 billion.

The fourth quarter Annuities Industry Estimates Chart can be found in the updated Data Bank. To view variable, fixed and total annuity sales over the past 10 years, visit Annuity Sales 2002-2011.

In other annuity news, Fitch Ratings, New York/Chicago, has disclosed the company is “concerned” about the risk profile, of contingent annuities.

In its latest release of Fitch Notes, the company questions whether the issuers of contingent annuities have appropriately structured the product in terms of pricing, transparency and capital reserving.

“We share key concerns voiced by U.S. life insurance companies, regulators, and trade group, including the potential for mispricing that could lead to significant financial problems for the life insurance industry down the road,” Fitch Ratings says. “Due to investment guarantees embedded in variable annuity products, the industry suffered material financial losses in the 2008-2009 financial crisis. We also share concerns that the CA product offering could cannibalize sales of existing annuity products and will not necessarily increase market share.”

“We do not portend any rating impact over the near term associated with the development of CA offerings and note that there has been very little business written in the new product to date,” the company adds. “Over the near term, we will be actively monitoring further developments related to the CA market, including forthcoming recommendations from the subgroup recently formed by the National Association of Insurance Commissioners (NAIC) to examine this market, and will discuss potential reserve and capital requirements.”