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IRI: VA Sales Rise in Fourth Quarter, but Fixed Annuity Sales Dip

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Sales of variable annuities reached a four-year high in 2011, but sales of fixed annuities dipped in the fourth quarter, according to a new report.

The Insured Retirement Institute (IRI), Washington, D.C. published this finding in a survey of annuity sales based on research from Morningstar Inc., Chicago, and Beacon Research, Evanston, Ill.

Net variable annuity sales in 2011 were the strongest since 2007, topping $27.7 billion, a 28% increase from 2010, according to Morningstar. Net variable annuity sales for the quarter increased by nearly 35% to $7.2 billion compared with $5.4 billion for the same period in 2010. While quarter-to-quarter net variable annuity sales declined, the fourth quarter was the second strongest quarter since mid-2008, the survey adds.

Industry-wide fourth quarter annuity sales topped $54.5 billion. Although sales were 6.65 lower than from $58.1 billion during the third quarter, industry-wide yearly sales were $231.1 billion in 2011 compared with $214.6 billion in 2010.

Fixed annuity sales for 2011 totaled $75.6 billion, down 1.1% from $76.4 billion in 2010, says Beacon Research. Fixed annuity sales for the fourth quarter dipped 8.8% to $17.3 billion from $19 billion during quarter three, but were relatively flat compared with 2010 fourth-quarter sales of $17.6 billion. There were $8.3 billion in qualified sales and $9.0 billion in non-qualified sales in the fourth quarter.

According to Morningstar, variable annuities also had their strongest overall year since 2007 in total (gross) sales, which increased more than 12% to $155.5 billion from $138.2 billion in 2010. Variable annuity sales for the fourth quarter were $37.2 billion, down 5% from $39.1 billion in the previous quarter.

Variable annuity net assets totaled $1.5 trillion during the fourth quarter, a 5.6% increase from $1.42 trillion during the third quarter. There were $25.6 billion in qualified sales and $11.6 billion in non-qualified sales in the fourth quarter.

“While gross sales show signs of leveling off, the sustained improvement in net cash flow indicates that variable annuities are increasingly attracting new money versus generating sales through exchanges of existing contracts,” said Morningstar Director of Insurance Solutions Frank O’Connor. 

Complete annuity sales reporting data can be found here.