After rising to the highest levels in five years, fixed annuity sales cooled off in the third quarter of 2014, based on the Insured Retirement Institute’s third-quarter 2014 sales results for the U.S. annuity industry released this week.
Fixed annuity sales dropped 10.7% quarter-over-quarter and 3.5% year-over-year to $21.7 billion in Q3, down from $24.3 billion in the previous quarter and $22.5 billion in the third quarter of 2013, according to IRI, which looks at data reported by Beacon Research and Morningstar Inc.
The data shows that industrywide annuity sales in the quarter reached $56.9 billion, a 5% decline from $59.9 billion in the previous quarter and a 1% decline from $57.5 billion in the third quarter of 2013.
“Ebbs and flows are normal in the course of an established and mature industry, and the numbers in the third quarter reflect that,” said Cathy Weatherford, IRI President and CEO, in a statement. “At the same time, mature does not equate to stagnant.”
Despite the fixed annuity sales’ cool numbers in Q3, Beacon Research President Jeremy Alexander reported that 2014 year-to-date fixed annuity sales were up 26% versus 2013, “the highest result since 2009.”
“We are very pleased with the overall positive increase we are seeing in the fixed annuity market despite historically low rates and a prolonged bull market in stocks,” said Alexander in a statement. He added, “Year-to-date results are positive in all fixed annuity product types. This includes fixed income products, which are up 30%; fixed indexed products, which are up 33%; and market value adjusted products, which are up a staggering 48%.”
Meanwhile, variable annuity total sales remained stable throughout Q3 2014.
According to Morningstar data, variable annuity total sales were flat in Q3 at $35.2 billion, a 1.1% decrease from $35.6 billion in Q2 2014 but a 0.4% increase from nearly $35.1 billion year over year.
“Variable annuity (VA) sales have remained stable over the past eight quarters, and the third quarter was no different,” said John McCarthy, product manager of annuity solutions for Morningstar, in a statement. “Net assets remained steady and new sales flows were solid during the quarter, but net flows dipped into negative territory because of redemption events, including withdrawals under living benefits, death benefit payments and group rollouts.” Variable annuity net assets, according to Morningstar, closed the third quarter at $1.9 trillion – a 1.6% decline from $1.93 trillion at the close of Q2 2014 and a 6.5% increase year over year from nearly $1.79 trillion at the close of the third quarter of 2013. Meanwhile, as McCarthy said, variable annuity net sales were negative for the quarter, estimated to be -$2.5 billion because of redemption activity.