The U.S. annuity industry ended 2013 on an upward trend, according to data reported by Morningstar Inc. and Beacon Research.
Increased fixed and variable annuity total sales during the fourth quarter pushed industry-wide sales to $59.3 billion, up 3.1 percent from the previous quarter sales of $57.5 billion and up 17.2 percent from 2012 fourth-quarter sales of $50.6 billion. For the full year, industry-wide sales increased 4.2 percent to $220.9 billion from $212 billion during the previous year.
Fixed annuity sales hit $23.5 billion in the fourth quarter – a 4.7 percent increase from nearly $22.5 billion in the previous quarter and a 45.2 percent increase from $16.2 billion in Q4 2012. For the full-year 2013, fixed annuity sales totaled $78.1 billion, a 16.6 percent increase from $67 billion in 2012.
Total sales for variable annuities climbed to $35.8 billion, a 2 percent increase from $35.1 billion in third-quarter 2013 and a 4.1 percent increase from $34.4 billion in fourth-quarter 2012. For the full-year 2013, variable annuity total sales dipped 1.5 percent to $142.8 billion from $145 billion in 2012.
“Supported by a resurgence in fixed annuity sales, industry-wide sales continue to move higher,” said Cathy Weatherford, IRI President and CEO, in a prepared statement. “It’s particularly noteworthy that income annuities continue to break new barriers, passing the $3 billion mark for the first time and reaching $3.5 billion.”
Beacon Research attributes the fixed annuity sales momentum during Q4 2013 to quarter-to-quarter increases in the sale of indexed and income annuities. Income annuity sales increased 23.3 percent from Q3 to Q4 to $3.5 billion, which surpassed the $3 billion sales mark for the first time. Indexed annuity sales rose 17 percent to $11.8 billion from Q3. For 2013 as a whole, the 16.6 percent growth in sales was supported by sales increases in all types of fixed annuity products, with market value adjusted (MVA) annuity sales taking the lead.
MVA annuity total sales for the year rose 41.4 percent to $6.7 billion from under $4.8 billion in 2012. The fixed annuity market saw approximately $11.5 billion in qualified sales and $12 billion in nonqualified sales during the fourth quarter – approximately $38.9 billion in qualified sales and $39.2 billion in nonqualified sales.
“The fixed annuity industry had its best year since 2009,” said Beacon Research President Jeremy Alexander, in a prepared statement. “Average credited rates increased 40 basis points during 2013 and, for the first time, there were year-over-year increases in sales of all types of fixed annuities.”
Variable annuity net assets hit a new all-time high of $1.87 trillion at the close of 2013. Variable annuity net sales were negative for the fourth quarter at -$2.8 billion, but were positive for the year at $1.3 billion. Within the variable annuity market, there were $23.5 billion in qualified sales and $12.3 billion in nonqualified sales. For the full-year 2013, there were $92.9 billion in qualified sales and $49.9 billion in nonqualified sales.