Annuity sales reached $59.1 billion during the fourth quarter 2015, up 1 percent from $58.5 billion during the third quarter and 4.4 percent from $56.6 billion during the fourth quarter of 2014, according to a report from the Insured Retirement Institute. The report is based on data reported by Beacon Research and Morningstar Inc.

For the full year, annuities sales totaled $228.8 billion, down slightly from $229.4 billion in 2014, but up 3.6 percent from $220.8 billion in 2013.

Fixed annuity sales during the fourth quarter reached their highest mark since the first quarter of 2009 at $28.2 billion. For the full year, fixed annuity sales reached $98.4 billion, up 7.5 percent from $91.5 billion in 2014.

Variable annuity total sales decreased to $30.9 billion in the fourth quarter from $32 billion in the third quarter of 2015 and $33.6 billion in the fourth quarter of 2014. For full-year 2015, variable annuity total sales were $130.4 billion, a 5.5 decline from $137.9 billion in 2014.

“The fourth quarter witnessed record sales of income annuities and fixed indexed annuities, which continue to push new highs,” said Cathy Weatherford, president and CEO of IRI. “Continued innovation is helping to spur the rapid sales growth of fixed indexed annuities. This includes the development of products with guaranteed lifetime income benefits as well as the introduction of products designed for the broker-dealer channel.”

Fixed indexed annuity sales reached a new high of $16.1 billion in the fourth quarter, an 11.9 percent increase from sales of $14.4 billion in the prior quarter and a 32.2 percent increase from sales of $12.2 in the fourth quarter of 2014. Income annuity sales also posted a new record in the fourth quarter, reaching $3.7 billion.

For the entire fixed annuity market, there were approximately $16.4 billion in qualified sales and $11.9 billion in nonqualified sales during the fourth quarter.

For the full year, fixed annuity sales posted their strongest year since 2009. Again, this growth is largely attributed to the record growth in sales of fixed indexed annuities, which reached $54.6 billion in 2015. This is a 13.9 percent increase from sales of $48 billion in 2014. For the full year, there were approximately $55.1 billion in qualified sales and $43.3 billion in nonqualified sales of fixed annuities.

“On a quarterly basis, fixed indexed and fixed income annuities hit new historical highs in Q4 2015, lifted by widening credit spreads, which allowed annuity manufacturers to offer more competitive credited rates and caps to policyholders,” said Jeremy alexander, president of Beacon Research. “Fixed sales ended 2015 up 7.9 percent, the third annual increase, and are up $31.6 billion since 2012. On an annual basis fixed indexed and MVA sales led the way with 14 percent and 13 percent increases, respectively, from 2014 to 2015. In addition, since 2011, overall fixed and fixed indexed sales in particular have grown substantially. This growth occurred during a time when the 10-year Treasury never rose above 3 percent and the S&P 500 rose more than 65 percent.”

According to Morningstar, variable annuity net assets increased in the fourth quarter of 2015, finishing the year at $1.87 trillion. This represents a 1.7 percent increase from the end of Q3 when net assets totaled $1.84 trillion, but a 2.5 percent decline from the end of 2014 when net assets totaled $1.92 trillion.

Within the variable annuity market, there were $20.8 billion in qualified sales and $10.1 billion in non-qualified sales during the Q4 2015. For the full year, there were $86.1 billion in qualified sales and $44.3 billion in non-qualified sales of variable annuities.

“2015 variable annuity sales lagged 2014 by 5.5 percent to end at $130.4 billion, the lowest annual sales since 2009,” said John McCarthy, senior product manager, annuity products, for Morningstar. “We believe some of the drop is due to a reduction in product exchanges, as guaranteed lifetime income benefits keep assets in place. While still negative at $5.2 billion, net flows recovered from an all-time low of negative $7.1 billion in the third quarter. This improvement supports our view that a higher percentage of new sales represents new money rather than product exchanges, despite outflows caused by benefit payments and aging group business.”

 

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