Although overall annuity sales perked up a bit in the second quarter, purchases of the product were down from last year. Indexed annuities, however, showed the most growth, according to two Q2 reports.
According to LIMRA’s second quarter 2012 U.S. Individual Annuities Sales survey, total sales jumped 4% from the first quarter of this year, increasing to $57 billion. Yet, total sales slumped 8% from the Q2 2011 tally of $61.9 billion. Year-to-date, total annuity sales also dropped 8%, going from $121.4 billion in the first half of 2011 to $111.8 billion between January and June of this year.
Bucking that trend were indexed annuities, which saw sales rise 6% to $8.6 billion in the second quarter compared to the same quarter of last year when the total for that segment came in at $8.1 billion, according to LIMRA. Further, in the first half of this year, indexed annuity sales improved 10% versus the first six months of 2011, rising from $15.2 billion to $16.7 billion. LIMRA noted that for the fourth consecutive quarter, indexed annuity sales outpaced traditional fixed annuities, capturing 47% of the fixed annuity market.
LIMRA theorized that the sale of indexed annuities is being driven by guaranteed lifetime withdrawal benefit (GLWB) riders. In Q2, 87% of indexed annuity products offered a GLWB, with 71% electing a GLWB rider, the highest level since LIMRA began tracking indexed GLWB election rates a year ago.
Meanwhile, variable annuity (VA) sales declined to $38.6 billion in the second quarter, down 5% from $40.6 billion in the same quarter of 2011, reports LIMRA. Yet when compared to the first quarter of this year, Q2 VA sales were up 5%. Year-to-date VA sales decreased 6%, dropping from $80.1 billion in the first half of 2011 to the $75.4 billion amassed between January and June of this year.
In a release detailing the report, Joseph Montminy, LIMRA’s assistant vice president of annuity research, said the “current economic conditions remain challenging for most insurers, driving overall annuity sales down.” He added, however, that indexed annuities are on pace for a record year.
Q2 total fixed annuity sales dropped 14% to $18.4 billion versus the second quarter of 2011 when sales hit $21.3 billion. In the first half, fixed annuity sales fell 12% to $36.4 billion from the $41.3 billion recorded in the first six months of 2011.
LIMRA, based in Windsor, Conn., grounded its findings on data from 57 companies that represent 95% of total market sales. Jackson National Life took the top spot for total annuity sales in Q2 ($10.9 billion) followed by MetLife ($10.564 billion) and Prudential Annuities ($10.561 billion).
A second-quarter report from AnnuitySpecs.com further underscores the growth of indexed annuity sales. Its 60th edition of AnnuitySpecs.com’s Indexed Sales & Market Report found that total indexed annuity sales in the second quarter climbed to $8.7 billion, a jump of 8% from the previous quarter. Viewed in comparison to the same quarter a year ago, sales were up nearly 6%. The report represents 99% of indexed annuity production.
Sheryl J. Moore, president and CEO of Pleasant Hill, Iowa-based Moore Market Intelligence, which owns AnnuitySpecs.com, pointed out in a statement elaborating on the recent report that Q2 sales were only 0.60% lower than the third quarter of 2010 when indexed annuity sales set a record.
“That being said, the second quarter was a period of flux for indexed annuities; nine different companies made changes to their products on 14 different occasions during this quarter,” stated Moore.
Many of those changes were related to GLWBs. Despite the decline in fixed interest rates and a shift to guaranteed income sales, GLWB elections in Q2 dropped to 53% of total indexed annuity sales. The bulk of the adjustments to annuity products “affected the relative competitiveness of these annuity benefits,” stated the AnnuitySpecs.com report.
In the indexed annuity space, Allianz Life once again was the number one carrier, grabbing 16% of market share. Next up was Aviva, American Equity, Security Benefit Life and Great American. Security Benefit Life’s Security Income Annuity was the top seller in the quarter.
AnnuitySpecs.com also tracked indexed life sales, which amounted to $303.6 billion in Q2, an increase of nearly 19% from the previous quarter. In contrast to the same quarter of last year, sales were up roughly 45%.
Moore remarked that this level of indexed life sales was “nearly record-setting” and should continue as more companies gear up to introduce new indexed products and the distribution landscape for such insurance products is “changing swiftly.”
Aviva retained its top spot in the indexed life market with 15% of market share, followed by AXA Equitable, Pacific Life Cos., AEGON Cos., and National Life Group.
AXA Equitable’s Athena Indexed UL was the number-one selling indexed life insurance product for the fifth consecutive quarter. Average target premiums on indexed life increased to $9,070 for the quarter, according to the AnnuitySpecs.com report.