Fixed Annuities Post Highest Sales Since 2009
March 26, 2015 by IRI
WASHINGTON, D.C. – The Insured Retirement Institute (IRI) today announced final fourth-quarter and year-end 2014 sales results for the U.S. annuity industry, based on data reported by Beacon Research and Morningstar, Inc. Industry-wide annuity sales in the fourth quarter of 2014 reached $56.6 billion, a 0.5 percent decrease from $56.9 billion in the previous quarter and a 4.6 percent dip from $59.3 billion in the fourth quarter of 2013. Despite the slight drop during the quarter, industry-wide sales were up for the full year. Industry-wide annuity sales reached $229.4 billion in 2014, a 3.8 percent increase from $220.9 billion in 2013 and an 8.2 percent increase from $212 billion in 2012.
Fixed annuity sales totaled $23 billion in the fourth quarter of 2014, according to Beacon Research. This was a 6.3 percent increase from just under $21.7 billion during the previous quarter but a 2 percent drop from $23.5 billion in the fourth quarter of 2013. For the full-year 2014, fixed annuity sales closed out their best year since 2009, surpassing the $91.5 billion mark. This was a 17.2 percent jump from sales of $78.1 billion in 2013. This strong growth was supported by record sales years for fixed indexed annuities and income annuities.
Variable annuity total sales in the fourth quarter of 2014 were $33.6 billion, according to Morningstar. This was a 4.6 percent drop from $35.2 in the third quarter of 2014 and a 6.2 percent decline from $35.8 billion in the fourth quarter of 2013. For the full-year 2014, variable annuity total sales were $137.9 billion, a 3.4 percent drop from $142.8 billion in 2013.
“The double-digit growth in fixed annuities in 2014 supported the strongest industry-wide annuity sales in three years,” said Cathy Weatherford, IRI President and CEO. “Not only was 2014 a year of growth in terms of sales, but also a year of growth in terms of the lifetime income offerings available in the marketplace. The year witnessed the continued expansion of deferred income annuities, regulators greenlighting qualifying longevity annuity contracts, and further development of investment-only variable annuities. With demand on the rise, and a wider array of products available in 2015 to meet consumers’ varying needs, we anticipate robust market activity in 2015.”
According to Beacon Research, quarterly and year-end fixed annuity sales were supported by strong sales of fixed indexed and income annuities. Fixed indexed annuity sales reached $12.2 billion in the fourth quarter of 2014, a 4.4 percent increase from sales of $11.7 billion in the third quarter of 2014 and a 3.5 percent increase from sales of $11.8 in the fourth quarter of 2013. For the full-year 2014, fixed indexed annuity sales surged to a record $48 billion, a 23.9 percent increase from sales of $38.7 billion in 2013. Income annuity sales also closed out a record year. Sales of income annuities reached $3.2 billion during the fourth quarter, pushing full-year sales above the $13 billion mark – an 18 percent increase from $11 billion in 2013. For the entire fixed annuity market, there were approximately $13 billion in qualified sales and $10 billion in non-qualified sales during the fourth quarter of 2014. For the full year, there were approximately $50.9 billion in qualified sales and $40.6 billion in non-qualified sales.
“Overall, fixed annuities were extremely robust with 2014 recording the third highest sales total ever,” Beacon Research President Jeremy Alexander said. “The big story in 2014 was the $4.8 billion surge in fixed indexed annuity sales through independent broker-dealers. Much of this 411 percent increase was due to the popularity of living benefit riders. In addition, for the first time since Q3 2013, quarterly sales of fixed annuities experienced a rise in sales across all product types.”
According to Morningstar, as a result of redemption activity, variable annuity net sales were negative for the quarter, estimated to be -$3.3 billion. Variable annuity net assets closed the year at $1.92 trillion. This is a 2.7 percent increase from $1.87 trillion at the close of 2013. Within the variable annuity market, there were $22 billion in qualified sales and $11.5 billion in non-qualified sales during the fourth quarter of 2014. For the full year, there were $89.9 billion in qualified sales and $47.9 billion in non-qualified sales.
“Sales were affected by strategy shifts and product line rationalization among the major carriers,” said John McCarthy, Senior Product Manager, Annuity Products, for Morningstar. “While sales were down overall, half of the top 10 issuers experienced increased sales and half experienced a decline. Overall, assets under management continued to grow as strong financial market performance buoyed the industry. Most carriers continue to offer lifetime income guarantees, for which there is strong demand, despite continued low interest rates.”
About Morningstar, Inc.: Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. Morningstar provides data on approximately 479,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 13 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $169 billion in assets under advisement and management as of Sept. 30, 2014. The company has operations in 27 countries.
About Beacon Research: Beacon Research is an independent research company and application service provider founded in 1997 and based in Northfield, Ill. Beacon tracks fixed and variable annuity features, rates and sales. Its quarterly Fixed Annuity Premium Study is the first and only source to analyze fixed annuity sales at the product level, and the first to make a decade’s worth of sales information available to subscribers online at www.annuitymarketstudy.com. Beacon lowers compliance risk and increases fixed annuity sales with 100% carrier-approved, comprehensive product profiles, spreadsheets and search tools for the advisor/rep websites of banks, TPMs, broker-dealers and marketing organizations. Carriers and financial institutions use its systems at www.annuitynexus.com for compliance review of 1035 exchanges, sales support, conservation and product research. Beacon also licenses information to other platforms. Directly and through licensees, Beacon information can be accessed by hundreds of financial institutions and thousands of advisors.
About the Insured Retirement Institute: The Insured Retirement Institute (IRI) is the leading association for the retirement income industry. IRI proudly leads a national consumer coalition of more than 30 organizations, and is the only association that represents the entire supply chain of insured retirement strategies. IRI members are the major insurers, asset managers, broker-dealers/distributors, and 150,000 financial professionals. As a not-for-profit organization, IRI provides an objective forum for communication and education, and advocates for the sustainable retirement solutions Americans need to help achieve a secure and dignified retirement. Learn more at www.irionline.org.