WINDSOR, Conn., Feb. 21, 2012 — Deferred income annuity (DIA) sales topped $1.0 billion in 2012, according to LIMRA's fourth quarter 2012 U.S. Individual Annuities Sales survey, which represents data from 95 percent of the market.
“As an emerging market, DIAs have experienced significant growth in 2012,” said Joe Montminy, assistant vice president and director of LIMRA annuity research. “We see new companies entering this market and existing players launching new products, targeting younger boomers looking to create an income stream when they retire. LIMRA estimates that collectively consumers age 45-59 have almost $10 trillion in financial assets1 so we anticipate these products will to continue to have remarkable growth.”
Fourth quarter DIA sales reached $390 million, which is almost 150 percent higher than sales in the first quarter ($160 million). However, they are still are very small part of the overall market, representing less than one percent of fourth quarter total annuity sales.
Total annuity sales were $52.6 billion in the fourth quarter, a decline of eight percent from the previous year. For the year, annuity sales dropped eight percent, tallying $219.4 billion.
Variable annuity (VA) sales decreased eight percent in the fourth quarter, to reach $35.0 billion. VA sales totaled $147.4 billion in 2012, which was seven percent lower than 2011.
“Unlike historical trends, VA sales did not follow equity market growth, which increased 13 percent in 2012,” noted Montminy. “VA sales performance in 2012 was clearly influenced by companies’ strategic management of their books of business – removing some products from the market, limiting additional contributions into existing contracts, and revising features/pricing on GLB riders.”
Total fixed annuity sales were $17.6 billion in the fourth quarter, falling seven percent compared with the fourth quarter of 2011. For the year, fixed annuity sales dropped 11 percent, hitting a 12-year low of $72.0 billion.
In 2012, indexed annuity sales hit a record high of $33.9 billion — a five percent increase compared to sales in 2011. Indexed annuity sales grew slightly in the fourth quarter, reaching $8.5 billion, an increase of two percent over one year ago. However, this was two percent lower than third quarter sales. Sales of indexed annuities have been buoyed by the growing interest of equity firms, like Apollo Global Management, Guggenheim Partners and Harbinger Group, which have invested in companies selling these products.
Guaranteed lifetime withdraw benefit (GLWB) riders for indexed annuities continue to propel sales. A record 73 percent of consumers elected a GLWB rider, when available. LIMRA estimates that 87 percent of indexed annuities sold offer GLWB.
Fixed-rate deferred annuity sales (book value and market value adjusted) experienced another quarter of steep declines, down 20 percent in the fourth quarter and 27 percent for the year. Annual fixed-rate deferred product sales were $25.7 billion in 2012, the lowest level since 1998.
Book value sales declined 21 percent in the fourth quarter to $4.9 billion; Market-value adjusted (MVA) sales were $1.0 billion, down 17 percent. For the year, book value and MVA declined 29 percent and 13 percent respectively.
Single premium immediate annuities (SPIAs) grew five percent in the fourth quarter to reach $2.0 billion. However, SPIA sales declined five percent in 2012 to $7.7 billion.
The fourth quarter Annuities Industry Estimates 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 2003-2012. Top twenty rankings of total, variable and fixed annuity writers will be posted in mid-March following the last company’s earnings call.
1 Retirement Income Reference Book (2012), LIMRA
Catherine Theroux, (860) 285-7787, firstname.lastname@example.org
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