Annuity sales declined 8.6% to $219.7 billion last year, dropping to the lowest level since 2005, according to LIMRA.

The combination of low interest rates and consumer caution have led to a challenging economic landscape for the industry. “Interest rates are having a large impact on overall annuity sales,” says Catherine Theroux, director of Public Relations at LIMRA. “For fixed annuities, people are less inclined to lock in rates at this level.”

Jackson National Life topped the total annuity leader board, reporting $22.4 billion in sales last year. Prudential Annuities had the highest variable annuity sales with $20 billion, and Allianz Life of North America had the highest fixed annuity sales with $5.5 billion.

Steady income from annuities was considered a safe harbor from the volatile markets of 2008, but people have since become increasingly reluctant to dive headfirst into them. Because of low interest rates, there is fear that inflation may diminish the purchasing power of a fixed annuity payment if locked in now.

“The goal of [insurance companies] is to balance their books of business so that they can offer a rate that’s attractive to consumers, but not at a loss,” Theroux says.

Consumers may be more cautious, but flat income levels and a higher tax environment means that annuities continue to retain their allure for many investors who seek to protect their assets.

Although fixed annuity sales have slowed down since their late 2008 and early 2009 highs, index annuities within fixed annuities reported a record high of $33.9 billion in 2012, a 5% increase over 2011, according to LIMRA.  

“In the long term, demand for these types of products will be significant, as companies often become creative in how to best reach the market as it stands,” says Theroux. “There’ll be a lot of different company offerings to take advantage, and help people take advantage to invest and retire.”

LIMRA’s complete top 20 list of total, variable, and fixed annuity sales rankings for 2012 can be found here.