AP Photo: Richard Drew

Total U.S. annuity sales were down slightly in first quarter in comparison to the fourth quarter of 2011. However, indexed and income annuities showed growth year-over-year, reports the Insured Retirement Institute (IRI), citing statistics from Morningstar and Beacon Research.

Industry-wide, annuity sales in Q1 reached $53.1 billion, a 2.5% drop from the $54.5 billion sold in the fourth quarter of last year.

In the variable annuity (VA) space, total sales dipped 2.7% to $36.2 billion from $37.2 billion in Q4 2011, according to Morningstar. In the first quarter of last year, VA sales totaled $39.1 billion.

Yet, variable annuity net assets hit an all-time high of $1.61 trillion in the first quarter, which equates to a 7.2% jump from $1.5 trillion in the fourth quarter of 2011.

Year-over-year, net variable annuity sales decreased 34.5% to $3.8 billion in the first quarter from the $5.8 billion booked in the same period in 2011. There were $24.3 billion in qualified sales and $11.8 billion in non-qualified sales in Q1, reveals Morningstar.

“While total assets increased more than 7%, assets in allocation funds increased slightly more than 13 percent, outpacing the increase in the S&P 500 Index,” said Frank O’Connor, Morningstar Director of Insurance Solutions in a statement announcing the Q1 results.Growth in the allocation class is highly correlated with growth in the use of income benefits, because investment in these types of funds is often required when an investor elects a guaranteed income benefit.”

Fixed annuity sales in Q1 slid 2.2% to $16.9 billion from $17.3 billion in the final quarter of last year, reports Beacon Research. Between January and March, there were roughly $7.3 billion in qualified sales and $9.6 billion in non-qualified sales. In the first quarter of last year, total fixed annuity sales came in at $18.6 billion.

Bucking the trend was the income annuity sector, where first-quarter sales jumped nearly 23% compared to the same period in 2011 ($2.2 billion versus $1.8 billion). Similarly, indexed annuity sales in the first quarter totaled $8.2 billion, roughly 9% above the $7.5 billion sold in Q1 2011.

Market-value adjusted annuity sales grew 1.6% to nearly $1.37 billion from the fourth-quarter 2011 tally of $1.35 billion. That number was down from the $1.5 billion sold in the same quarter a year ago, reports Beacon Research.

“Growing demand for guaranteed retirement income helped push income and indexed annuity sales above year-ago levels,” said Beacon Research President Jeremy Alexander in a statement. “Market value adjustments enabled carriers to credit a higher rate of interest, and that boosted quarter-to-quarter sales of these products.”