Second-quarter 2013 sales results for the U.S. annuity industry, based on data reported by Morningstar, Inc. and Beacon Research, reveal a 9.9-percent increase to nearly $54.5 billion from $49.6 billion for the previous quarter.
Year-over-year, however, that sales number is down 1.4 percent from $55.3 billion in the second quarter of 2012.
Rising interest rates, along with the steepest yield curve in nearly two years, helped drive second-quarter fixed annuity sales growth, Beacon Research President Jeremy Alexander said. Strong demand and new product introductions boosted deferred income annuity sales nearly 40 percent from first quarter.
A week ago, IRI shared numbers emphasizing the success of deferred income annuities (DIAs); today, variable and fixed annuities were in the spotlight, as each showed strong growth in the second quarter.
In fact, fixed annuity sales rose to their highest quarterly level since the fourth quarter of 2011. Sales totaled $17.14 billion, up 14.6 percent from just under $15 billion in the first quarter and up 0.2 percent from $17.10 billion in the second quarter of 2012, according to Beacon Research. Meanwhile, variable annuity total sales topped $37.3 billion in the second quarter of 2013, according to Morningstar. This is a 7.8-percent increase from $34.6 billion in the first quarter, but a 2.2-percent drop from nearly $38.2 billion in the second quarter of 2012.
In previous quarters, demand for lifetime income was balancing headwinds from low interest rates, said Cathy Weatherford, IRI President and CEO. Now with rates rising, we are seeing sales swing upwards.
According to Beacon Research, sales of all types of fixed annuities increased from first-quarter levels. Sales of market value adjusted annuities rose 34.9 percent, while indexed annuity sales were up by 17.1 percent and income annuity sales were up by 16.9 percent. For the fixed annuity market, there were $9.4 billion in qualified sales and $7.7 billion in non-qualified sales during the second quarter.
According to Morningstar, variable annuity total net assets increased by a fraction of a percent from the previous quarter. Though only a slight increase, the upward movement marked the seventh-consecutive quarterly increase in variable annuity total net assets, which stand at more than $1.7 trillion. This is a 10.1 percent increase from almost $1.6 trillion in the second quarter of 2012. Within the variable annuity market, there were $23.8 billion in qualified sales and $13.5 billion in non-qualified sales during the quarter.
Net sales improved significantly in the second quarter despite continued large outflows from retirement plans and companies that have exited the industry over the past several quarters, said Frank OConnor, product manager, Morningstar Annuity Research Center.