Total annuity sales improved 11 percent in the first quarter of 2014, compared to the first quarter of 2013, totaling $57.7 billion according to the LIMRA Secure Retirement Institute (LIMRA SRI).
Annuity sales were driven largely by fixed annuity sales, which experienced a 43 percent increase in the first quarter, compared to prior year, reaching $23.5 billion.
“Despite recent declines in interest rates – falling from just over 3 percent at the end of 2013 to 2.7 percent at the end of the first quarter- we are still predicting approximately 10 percent growth for fixed annuities in 2014,” said Todd Giesing, senior analyst, LIMRA SRI Annuity Research.
Fixed-rate deferred annuities – Book Value and MVA – had another robust quarter, increasing 48 percent in the first quarter to reach $8 billion.
Indexed annuity sales rose 43 percent in the first quarter, totaling $11.3 billion. Product innovation has played an important role in growing the indexed annuity market – especially in new distribution channels. More companies are introducing uncapped crediting strategies that utilize volatility-controlled indices to manage the risk.
First quarter indexed annuity sales through the bank and independent broker-dealer (IBD) channels reported significant growth. In the first quarter of 2013, IBDs represented just 3 percent of the indexed annuity market. As of first quarter 2014, IBDs represent 13 percent of the market. Banks also saw substantial growth from 10 percent of the market in first quarter 2013 to 16 percent in the first quarter of this year.
“The increases in the banks and IBD channel are encouraging because they represent organic growth” noted Giesing. “Traditionally, independent agents have represented most of the indexed annuity sales. Recent sales growth in the bank and IBD channels has not detracted from the independent agent channel, which increased 15 percent in the first quarter.”