Total annuity sales hit $61.9 billion in the fourth quarter of 2013 representing an increase of 17 percent — the largest quarterly percentage increase in 11 years, according to LIMRA Secure Retirement Institute (SRI).
For full year 2013, annuity sales were $230.1 billion, a 5 percent increase over 2012. Fourth quarter sales of indexed annuities reached $11.9 billion — a new quarterly record and a jump of $1.7 billion from the prior quarter.
“There were several reasons indexed annuities has such a strong fourth quarter,” said Joe Montminy, assistant vice president, LIMRA SRI Annuity Research.
“Improved interest rates make the product offerings more attractive and they have benefited from continued product innovation. Another reason is the organic growth in the banking and Independent B-D channels,” added Montminy. “This growth was additive and not at the expense of the independent channel, which saw a 24 percent increase in the fourth quarter and makes up 71 percent of the market.”
Indexed annuity sales were up 16 percent in 2013 compared to 2012 and totaled $39.3 billion. Fixed annuity sales were $25.6 billion in the quarter, the highest they have been since the second quarter of 2009 and up 45 percent compared to last year. Total fixed annuities sales grew 17 percent in 2013, totaling $84.8 billion.
Fixed-rate deferred annuities
Fixed-rate deferred annuities — Book Value and MVA — had another outstanding quarter, increasing 54 percent in the fourth quarter compared to last year. The improved interest rate environment was the main reason for this substantial increase.
Fixed-rate annuity sales reached $8.5 billion in the fourth quarter. For the year, fixed-rate annuities improved 19 percent to $29.3 billion.
Variable annuity sales marked positive growth in the fourth quarter, up 4 percent to $36.3 billion. Following a trend for the past few years, VA sales are no longer tracking with the equities markets. Despite extraordinary 32 percent growth in the equities market in 2013, VA sales were down 1 percent at year-end compared with 2012 and totaled $145.3 billion.
Companies continue to carefully manage their VA business. More emphasis on accumulation VA’s appears to be an emerging trend. In 2013, more companies introduced these types of products into their portfolios as they shift their focus to tax-deferred products with alternative investment options and indexed-linked VAs.