LIMRA: Variable Annuity Sales Experience Double-Digit Growth in the Third Quarter of 2011

Indexed and fixed immediate annuity sales match record levels

WINDSOR, Conn., Nov. 16, 2011 — For the second consecutive quarter, variable annuity (VA) sales improved 16 percent compared to the prior year, totaling $40.2 billion in the third quarter, according to LIMRA's third quarter 2011 U.S. Individual Annuities Sales survey, which represents data from 94 percent of the market.

“While third quarter VA sales were two percent lower than second quarter results, VAs performed significantly better than the market, which was down 15 percent,” said Joseph Montminy, assistant vice president for LIMRA’s annuity research. “The equity markets in the third quarter were the most volatile we have experienced since the financial crisis began in late 2008, yet consumers’ demand for guaranteed lifetime income helped sustain VA sales.”

VA sales have experienced six consecutive quarters of positive growth – the last three in double digits. In the third quarter, VA guaranteed living benefit (GLB) riders were elected 88 percent of the time, when a GLB was available at purchase. In the first nine months of 2011, VA sales jumped 18 percent, to reach $120.9 billion.

Total annuity sales hit $60.4 billion in the third quarter, an increase of eight percent compared to prior year. Year-to-date, annuity sales reached $182.8 billion, improving 11 percent from the first nine months of 2010.

Fixed annuity sales continued to struggle in the current low interest rate environment, falling six percent in the third quarter and down one percent for the first nine months of 2011. Total fixed annuity sales equaled $20.2 billion in the third quarter and $61.9 billion in the first nine months of 2011. With the Federal Reserve keeping interest rates low, we anticipate total fixed annuities will remain within this trading range for the next couple of years.

Indexed annuity sales in the third quarter matched the record level of $8.7 billion set in the third quarter of 2010, which is an increase of seven percent from the second quarter of 2011. In addition, indexed annuities captured 43 percent of the fixed annuity market, exceeding the more traditional fixed-rate annuity sales (book-value and market-value adjusted), which had 40 percent market share. LIMRA expects that indexed annuities will have a record year in 2011.

Immediate annuity sales matched the record sales of $2.2 billion set in the second quarter and were up 10 percent compared to prior year. “The demand for a guaranteed income stream outweighed the low interest rate environment,” added Montminy. “We expect sales of fixed immediate annuities to set new records, exceeding $8 billion in 2011, and will continue to perform well as more of the Boomers without pensions approach retirement and need to create that monthly paycheck.”

Book-value sales dropped seven percent in the third quarter, to reach $6.9 billion. This was a 19 percent decline from second quarter sales. For the first nine months of 2011, book-value sales rose two percent to $24.1 billion.

Market-Value Adjusted (MVA) sales plummeted 33 percent in the third quarter, to $1.2 billion. Year to date, MVA sales have dropped 15 percent.

A list of the top 20 writers of overall total annuities, variable annuities and fixed annuities ranked by third quarter 2011 sales results, as well as the third quarter Annuities Industry Estimates chart, can be found in the updated Fact Tank.

LIMRA Contacts:

Donna G. Sullivan, 860-285-7875, dsullivan@limra.com
Catherine Theroux, 860-285-7787, ctheroux@limra.com

About LIMRA

LIMRA is a worldwide research, consulting and professional development organization that helps more than 850 insurance and financial services companies in 73 countries increase their marketing and distribution effectiveness. Visit LIMRA at www.limra.com.