Year-over-year annuity sales are up overall, but variable annuities are still in negative territory.

Industry-wide annuity sales reached $56.1 billion in the first quarter of 2014, according to the Insured Retirement Institute, which compiled data from Morningstar and Beacon Research. This is up 13.1% compared with the first quarter of 2013, when sales totaled $49.6 billion, but down from the fourth quarter of 2013, when total annuity sales hit $59.3 billion.


Meanwhile, variable annuity net sales declined $1.1 billion for the first quarter following a $2.8 billion loss in flows from the 2013 fourth quarter. They were still higher than year before when net sales totaled $900 million, according to Morningstar.

Variable annuity total sales in the first quarter dropped to $33.5 billion, or 6.4%, from $35.8 billion in the previous quarter. Year-over-year total sales of variable annuities dropped to $33.5 billion from $34.6 billion. 

At the same time, Morningstar annuity specialist John McCarthy said, "product development remains active, and several products that offer lifetime withdrawal benefits saw increased sales, reflecting continued advisor and investor demand for income guarantees"

But not all advisors are sold on variable annuities. Henry Montag, a CFP in Uniondale, N.Y., says he last sold a variable annuity about five years ago and that the tax-deferred retirement vehicles have a "horrible reputation" among investors. That’s why some advisors have been reluctant to utilize them with clients.

"Between bad press, high mortality expenses, adverse tax expenses and high commissions, they have been given a very bad reputation. So fewer people are buying them," says Montag. "For the time being I don't think variable annuities are going to go back up, because the insurance industry isn't doing anything to combat the negative perception."


IRI reported fixed annuity sales in the first quarter fell to $22.6 billion from $23.5 billion in the fourth quarter of 2013, a decline of 4.1%, according to data provided by Beacon Research.

However, the first quarter total was 51% higher from a year earlie. This was due largely to a 44.3% increase in indexed annuities, which reached $11.2 billion in sales, down slightly from a record-high $11.8 billion in the previous quarter. This was the second highest quarterly sales of fixed annuities on record, according to Beacon.

Market value adjusted annuity sales reached $2.48 billion in the first quarter, 26% higher than in the previous quarter, and jumped 154.6% from a year earlier.

Montag says he likes fixed income annuities lately due to the minimum guaranteed rate investors receive from insurance companies. They also offer protection should interest rates rise during their contracts.

"They have great tax-advantages," says Montag. "People are looking for safety."

Read more:


Register or login for access to this item and much more

All Financial Planning content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access