LIMRA: Annuity Sales Struggle Under Weight of Low Interest Rates

Indexed Annuity Sales Match Record levels In the Third Quarter 2012

WINDSOR, Conn., Nov. 19, 2012 — Overall annuity sales in the third quarter declined 10 percent compared with the third quarter of 2011, to reach $54.3 billion, according to LIMRA's third quarter 2012 U.S. Individual Annuities Sales survey, which represents data from 95 percent of the market.

For the first nine months of 2012, annuity sales fell eight percent compared with prior year, totaling $166.1 billion.

"Protracted low-interest rates have impacted all lines of the annuity business, causing manufacturers to reassess their exposure among various product lines," said Joe Montminy, assistant vice president and director of LIMRA annuity research. "The sustained uncertain economic environment has many companies implementing conservative risk management strategies in an effort to prudently manage their business."

Variable annuity (VA) sales declined eight percent in the third quarter, reaching $36.6 billion. Year-to-date, VA sales were $112 billion, a decline of seven percent from the prior year. While leading VA writers have announced they are making adjustments to their book of business, LIMRA believes the total impact of these decisions has not fully reached the market.

VA guaranteed living benefit riders (GLB) continue to be popular with consumers. When available, VA GLB riders were elected, 87 percent of the time.

Total fixed annuity sales remained bleak, falling 13 percent in the third quarter, reaching levels not seen since early 2007. In the third quarter, total fixed annuity sales were $17.7 billion and year-to-date sales totaled $54.1 billion.

Indexed annuity sales remained strong in the third quarter at $8.7 billion primarily due to new companies performing well in the market. Year-to-date, indexed annuity sales grew six percent, reaching $25.4 billion. LIMRA remains confident that indexed annuities will have a record-breaking year in 2012.

Guaranteed lifetime withdraw benefit (GLWB) riders continue to propel indexed annuity sales. Seventy-one percent of consumers elected a GLWB rider, when available. LIMRA estimates that 88 percent of indexed annuities sold offer GLWB.

Fixed-rate deferred annuities (book value and market value adjusted) fell precipitously in the third quarter, down 26 percent from the third quarter of 2011. Book value sales sank 28 percent in the third quarter to $5.0 billion; Market-value adjusted (MVA) sales were $1.0 billion, down 17 percent. For the year, book value and MVA declined 31 percent and 13 percent respectively. Fixed-rate deferred product sales are at the lowest level since the late 1990s.

Single premium immediate annuities (SPIAs) fell nine percent compared to one year ago but were up slightly from the second quarter of 2012, to $2.0 billion. In the first nine months of 2012, SPIA sales declined eight percent compared with prior year. One emerging market is the deferred income annuity (DIA) market. DIA sales have risen from $160 million in the first quarter of 2012 to $210 million in the second quarter and reached to $270 million in the third quarter of 2012.

A list of the top 20 writers of overall total annuities, variable annuities and fixed annuities ranked by third quarter 2012 sales results, as well as the third quarter Annuities Industry Estimates chart, can be found in the updated Fact Tank.

LIMRA Contact:

Catherine Theroux, (860) 285-7787, ctheroux@limra.com

About LIMRA

LIMRA, a worldwide research, consulting and professional development organization, is the trusted source of industry knowledge, helping more than 850 insurance and financial services companies in 73 countries increase their marketing and distribution effectiveness. Visit LIMRA at www.limra.com