U.S. fixed indexed annuity sales on growth course

Sales of FIAs in the first quarter of 2015 reached $11.6 billion for the quarter, a 3.1 percent increase from sales in the same quarter of 2014. What’s more, fixed indexed annuities now represent more than half – 55.6 percent – of the fixed annuity market during the quarter, a new record share.

Cathy Weatherford, IRI President and CEO, said there will be an upward trend in annuity sales as this year progresses. “Interest rates were down sharply in January, and with a strong consensus across the market that rates will reverse course this year, it is logical to conclude that some consumers decided to defer their purchases,” Weatherford said. “As rates rebound, we expect pent-up demand to lead to solid sales, as lifetime income remains highly attractive to retirement savers seeking to ensure their savings will last throughout retirement.”

During the first quarter, variable annuity (VA) net sales were negative, as a result of redemption activity. U.S. variable annuity sales during the period are estimated to be -$3.5 billion, according to Morningstar.  Within the variable annuity market, there were $21.1 billion in qualified sales and $10.7 billion in non-qualified sales during the first quarter of 2015, according to the research. 

John McCarthy, Senior Product Manager, Annuity Products, for Morningstar, explains that assets under management continue to grow and are helped by solid investment performance. “New sales continue to flow into VAs, though at a slower clip than last year. Investors are showing their preference for more aggressive investment options inside variable annuities, which may indicate a loosening of the risk aversion we’ve seen in the recent past,” McCarthy said. “This trend is playing out via the continued flows into ‘investment oriented’ VA contracts, which in addition to core holdings, also offer alternative and non-correlated investment choices.”