WASHINGTON, D.C. – The Insured Retirement Institute (IRI) today announced final third-quarter 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 third quarter of 2014 reached $56.9 billion, a 5 percent decline from $59.9 billion in the previous quarter and a 1 percent dip from $57.5 billion in the third quarter of 2013.
Variable annuity total sales were flat in the third quarter of 2014, according to Morningstar, coming in at $35.2 billion. This was a 1.1 percent decrease from $35.6 billion in the second quarter of 2014, but a 0.4 percent increase from nearly $35.1 billion in the third quarter of 2013. After rising to the highest levels in five years, fixed annuity sales cooled off in the third quarter of 2014, dropping to $21.7 billion, according to Beacon Research. This was a 10.7 percent decrease from $24.3 billion in the previous quarter and a 3.5 percent decline from $22.5 billion in the third quarter of 2013.
“Ebbs and flows are normal in the course of an established and mature industry, and the numbers in the third quarter reflect that,” said Cathy Weatherford, IRI President and CEO. “At the same time, mature does not equate to stagnant. This is a market that continues to innovate. The emergence of deferred income annuities over the past few years is a perfect example. Barely a blip in sales a short time ago, sales have since grown to $1 billion in 2012, to $2.2 billion last year, and are on pace to post double-digit growth in 2014. We expect this type of ongoing innovation to contribute meaningfully to overall sales as time goes on.”
According to Beacon Research, sales of all types of fixed annuities decreased from the previous quarter, yet sales of indexed annuities and income annuities remained well above their levels for the same period in 2013. Indexed annuity sales reached nearly $11.7 billion during the third quarter of 2014, a 9.6 percent drop from $12.9 billion in the previous quarter but a 16 percent rise from sales of nearly $10.1 billion in the third quarter of 2013. Likewise income annuity sales reached $3.11 billion during the third quarter of 2014, an 8.3 percent drop from $3.39 billion in the previous quarter, but a 10.5 percent increase from sales of nearly $2.82 billion in the third quarter of 2013. For the entire fixed annuity market, there were approximately $9.5 billion in qualified sales and $12.1 billion in non-qualified sales during the third quarter of 2014.
“We are very pleased with the overall positive increase we are seeing in the fixed annuity market despite historically low rates and a prolonged bull market in stocks,” said Beacon Research President Jeremy Alexander. “2014 year-to-date fixed annuity sales were up 26 percent versus 2013, the highest result since 2009. Year-to-date results are positive in all fixed annuity product types. This includes fixed income products, which are up 30 percent; fixed indexed products, which are up 33 percent; and market value adjusted products, which are up a staggering 48 percent.”
According to Morningstar, variable annuity net assets closed the third quarter at $1.9 trillion. This is a 1.6 percent decline from $1.93 trillion at the close of the second quarter of 2014, but a 6.5 percent increase from nearly $1.79 trillion at the close of the third quarter of 2013. As a result of redemption activity, variable annuity net sales were negative for the quarter, estimated to be -$2.5 billion. Within the variable annuity market, there were $22.7 billion in qualified sales and $12.5 billion in non-qualified sales.
“Variable annuity (VA) sales have remained stable over the past eight quarters, and the third quarter was no different,” said John McCarthy, Product Manager, Annuity Solutions, for Morningstar. “Net assets remained steady and new sales flows were solid during the quarter, but net flows dipped into negative territory because of redemption events, including withdrawals under living benefits, death benefit payments, and group rollouts. Carriers still appear to be strategically managing their VA volumes and focusing on developing non-benefit, “investment only” offerings to help investors take advantage of the tax-deferred benefits of variable annuities.”
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.