Industrywide Annuity Sales Up 10.8% in Second Quarter
September 8, 2015 by Dennis Gorski, managing editor-online, BestWeek: Dennis.Gorski@ambest.com
WASHINGTON – Second-quarter industry-wide annuity sales rose 10.8% to $58.4 billion from last quarter but were still 2.5% shy of last year’s mark, according to figures from the Insured Retirement Institute.
Second-quarter sales were powered by an 11.7% rise in variable annuities, to $35.6 billion, unchanged from last year. Fixed-annuity sales were up 9.5% to $22.8 billion, but down 5.9% from last year.
Using data from Beacon Research and Morningstar Inc., IRI President and Chief Executive Officer Cathy Weatherford noted “robust sales helped swing VA net flows back into positive territory, reversing the trend of the prior three quarters. Meanwhile, in the fixed market, indexed annuity sales saw their second best quarter on record.”
She added “slightly higher interest rates and continued consumer demand for lifetime income supported strong sales across the market during the second quarter.”
Net sales for VA products reached $2.9 billion, and VA net assets rose 1.8% to $1.98 trillion, the IRI said. The entire fixed annuity market reported about $13 billion in qualified sales and $9.8 billion in non-qualified sales.
“When we see a bump-up like we did in the second quarter, in particular on the variable annuities side, that’s an indicator of a fair amount of new dollars coming into the products from other types of investments,” Frank O’Connor, IRI’s vice president of research and outreach, told Best’s News Service. “If we see interest rates continue to improve, then we could some more generous lifetime benefits on the variable annuities side. That net increase in the second quarter could start turning into more of a longer term trend in increasing (VA) sales in addition to increasing sales on the fixed annuities side, which we’d expect to see with higher interest rates as well.”
He said longer term demographic themes are continuing to support sales of annuities as baby boomers in particular move into retirement and the awareness around the responsibility of individuals to create their own retirement income streams.
“We always have that demand in the backdrop for these types of products,” he added. “I think we’re going to see the sales really be tied more to what the benefits are offering to solve that income need and what the demographics point to in terms of the number of people who are in that position in their lives where they need that income.”