Variable Annuities Slowly Recover, LIMRA Finds

WINDSOR, Conn., Feb. 18, 2010 — After a decline of 26 percent in the first six months of 2009, variable annuities (VA) were only down 18 percent for the year, as quarterly VA sales slowly improve from the first quarter, according to LIMRA's U.S. Individual Annuities quarterly sales survey.

VA sales improved slightly in the fourth quarter as compared to the third quarter, up three percent to $32.6 billion but were down three percent when compared to the fourth quarter of 2008. VA sales totaled $127 billion.

"The last time VA sales were at this level was in 2003, at the end of the last financial crisis," said Joe Montminy, assistant vice president and research director for LIMRA's annuity research. "VA sales experienced significant losses from the third quarter of 2008 through first quarter 2009 and while we are seeing VAs slowly recover, the recovery is slower than expected. We attribute this partly to a decline in 1035 exchanges."

Overall individual annuity sales fell in the fourth quarter, down two percent as compared the prior quarter, to reach $53.3 billion. This is a 22 percent decline from the fourth quarter of 2008. Total individual annuity sales declined 11 percent in 2009, to reach $234.9 billion.

In fourth quarter of 2009, fixed annuity sales continued its decline, down 10 percent as compared to the prior quarter and down 41 percent from the fourth quarter of 2008, where fixed annuities experienced incredible growth. Fixed annuity sales totaled $20.7 billion in the fourth quarter and $107.9 billion for the year, which was a one percent decline from 2008. LIMRA predicts fixed annuities will remain depressed as long as interest rates remain at current levels-CDs are just too attractive in this environment.

In 2009, indexed annuities had a record year, increasing nine percent, reaching $29.4 billion, as compared to 2008. Indexed annuities performed very well throughout the year, with a record-high in the second quarter. Indexed annuities fourth quarter sales were down five percent from the third quarter, totaling $6.9 billion.

For the third consecutive quarter, book value declined as compared to the prior quarter, down 10 percent from the third quarter and 43 percent as compared to the fourth quarter of 2008. For 2009, sales of book value annuities are up two percent benefiting from a very strong first quarter.

Fourth quarter MVA sales were down 36 percent from the third quarter and declined 80 percent as compared to prior year. 2009 MVA sales finished 20 percent lower from 2008 totals.

A list of the top 20 writers of overall total annuities, variable annuities and fixed annuities ranked by year-end 2009 sales results and the fourth quarter Annuities Industry Estimates Chart can be found in the updated Fact Tank. To view variable, fixed and total annuity sales over the past 10 years, please visit Annuity Sales 2000-2009.

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