As an emerging market, deferred-income annuities have seen 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 consumers age 45 to 59 have almost $10 trillion in financial assets so we anticipate these products will to continue to have remarkable growth.”
Deferred-income annuity sales topped $1.0 billion in 2012, according to LIMRA’s fourth quarter 2012 survey, which represents data from 95% of the market. Fourth quarter deferred-income annuity sales reached $390 million, which is almost 150% higher than sales in the first quarter ($160 million). However, they are still a 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 8% from the previous year. Annuity sales dropped 8% for the year. Variable annuity sales totaled $147.4 billion in 2012, which was 7% lower than 2011.
Unlike historical trends, variable annuity sales did not follow equity market growth, which increased 13% in 2012, noted Montminy. Variable annuity sales were influenced by companies removing some products from the market, limiting additional contributions into existing contracts, and revising features/pricing on GLB riders.
Total fixed annuity sales fell 7% in the fourth quarter compared to the fourth quarter of 2011. For the year, fixed annuity sales dropped 11%, hitting a 12-year low.
In 2012, indexed annuity sales hit a record high of $33.9 billion — a 5% increase compared to sales in 2011. Indexed annuity sales grew slightly in the fourth quarter, reaching $8.5 billion, an increase of 2% over one year ago. However, this was 2% 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% of consumers elected a GLWB rider, when available. LIMRA estimates that 87% 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% in the fourth quarter and 27% 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% in the fourth quarter. Single premium immediate annuities (SPIAs) grew 5% in the fourth quarter. However, SPIA sales declined 5% in 2012 to $7.7 billion. For more information, visit www.limra.com.
