Filed Under:Life Insurance, Life Products

LIMRA: Q1 a wipeout for annuity sales

Annuity sales took a steep tumble in the first quarter, according to LIMRA. Even indexed annuities, which have shown strength while other categories sagged, didn’t escape the slump.

When the numbers from 58 companies representing 94 percent of the market were tallied up for the first quarter, total sales reached $51.7 billion, a 6 percent drop from a year ago.

Breaking out by product type, variable annuities (VAs) charted a 4 percent decline in sales in Q1, sliding to a total of $35.5 billion, the sixth consecutive quarter of decreases on a year-over-year basis. However, LIMRA pointed out that that number was 1 percent higher than in the fourth quarter of 2012. Variable annuity living benefit election rates held steady at 84 percent.

An even steeper dive was recorded in the fixed annuity space, where total sales dipped to $16.2 billion in Q1, down 11 percent from a year ago and the eighth consecutive quarter of declines.

Following record high sales in 2011 and 2012, indexed annuities fell back to earth. The $7.8 billion sold in Q1 represented a 4 percent decline from the same quarter a year ago and the lowest amount in two years.

Meanwhile, election rates of guaranteed lifetime withdrawal benefit (GLWB) riders on indexed annuities remained strong, with 72 percent of consumers electing a GLWB rider when available. LIMRA estimates that 88 percent of indexed annuities products in the market offer GLWB riders.

“VA sales continue to struggle despite sustained equity market gains,” said Joseph Montminy, assistant vice president and director of LIMRA annuity research, in a statement. “In addition, all significant fixed annuity product types declined in the first quarter of 2013. In many ways, the current market is more challenging to many annuity manufacturers than the recent financial crisis.”

In response to that challenge, some companies, such as MetLife, have decided to scale back VA sales for the present time, which could explain why sales are in a free fall.

DIAs buck the trend

One product type – deferred income annuities, or DIAs – bucked the downward trend. With new companies entering the market and existing players launching new or revamped products, sales of DIAs reached $395 million in Q1, a leap of 147 percent above the first quarter of last year.

Other sales statistics from LIMRA included:

  • Fixed immediate annuities fell 6 percent in the first quarter to a total of $1.7 billion.
  • Fixed-rate deferred annuity sales dropped 25 percent in Q1 to $5.2 billion. Back in Q1 2009, sales of those products hit $26 billion.
  • Book value sales declined 26 percent in the first quarter to $4.2 billion.
  • Market-value adjusted (MVA) sales were $1 billion, down 23 percent compared with the first quarter of 2012.

Later this week, LIMRA will release the top 20 annuity writers in Q1.

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