The Depository Trust & Clearing Corporation recorded declines in both annuity inflows and outflows in January, the company disclosed today.
The DTCC, New York, published its latest findings on annuity activity in Analytic Reporting for Annuities, an online information source containing aggregated data from transactions processed by the DTCC’s Insurance & Retirement Services unit.
I&RS is a central messaging connection for annuity and life insurance transactions, which enables insurance companies to provide broker/dealers with daily financial transaction information. I&RS processes approximately 150 million transactions each month.
Annuity inflows processed by DTCC in January declined by more than 20%, to $6.2 billion from $7.8 billion in December. Outflows processed in January declined almost 8% to $5.5 billion from $5.9 billion in December.
DTCC says the top 10 insurance companies accounted for 66% of all inflows processed in January. And the top 10 annuity products accounted for 36% of all inflows.
DTCC adds that 538 annuity products saw positive net flows in January, while 2,256 annuity products saw negative net flows, where the amount redeemed exceeded the amount invested.
DTCC says the increasing divergence of inflows between IRA accounts and non-qualified accounts seen in 2011 narrowed in January due primarily to a drop in inflows in IRA accounts. Individual retirement accounts garnered $921 million in net inflows in January. This compares with $398 million in net inflows for 401(k)s, DTCC says.
Although non-qualified accounts attracted 39% of inflows in January, for the first time since July 2011 the net cash flows into non-qualified accounts were negative (-$556 million), meaning that more funds were withdrawn than added.
“Non-qualified accounts garnered only 6% of net cash flows in 2011, and this drop into negative net flows in January is another display of the greater persistence, or stickiness, of investments into qualified plan accounts compared to non-qualified accounts,” says Andrew Blumberg, who is leading the Analytic Reporting initiative for DTCC. In 2011 regular IRA accounts took the lion’s share of net flows with 77% and 401k plans attracted 13% of net flows.
In August 2011, DTCC joined forces with the Retirement Income Industry Association (RIIA) to analyze cash flows by RIIA-defined broker/dealer distribution channels and product categories. For the six distribution channels defined by RIIA, the following are the percentages of inflows processed by DTCC I&RS in January:
– Independent broker/dealers — 27%
– Wirehouses — 19%
– Regional broker/dealers — 14%
– Bank broker/dealers — 13%
– Insurance broker/dealers — 10%
– Others — 17%
Additional findings from the report can be found here.