Despite a significant decline in sales in the past years, advisors and industry executives remain upbeat about annuities because the products are expected to protect principal and provide retirement income.

According to a survey conducted in the first quarter by the Insured Retirement Institute released Monday the overall outlook for the annuity industry is positive. While some challenges remain, respondents indicated the growth industry’s opportunities are strong, with growth for variable annuities ranking 4.1 on a five-point scale, and fixed ranking 3.2 on the same scale.

“With the increased spotlight placed on the exclusive retirement income security provided by annuities, it’s no surprise positive expansion is coming,” Cathy Weatherford, the president of the Insured Retirement Institute, said in a press release. “The findings of the survey clearly underscore this potential, and foretell future innovations and advancements in living benefit offerings. While insurers work to further develop simplified offerings, both broker/dealers and advisors consider living benefits to be a key factor in selecting a product. Robust living benefit guarantees help balance out possible market volatility with a level of protection, offering consumers peace of mind as they continue to reenter the market. The coming year will undoubtedly bring about important advancements throughout the industry.”

Despite all this positive sentiment, total annuity sales fell almost 7% from the fourth quarter to the first quarter, from $50.9 billion to $47.4 billion, according to the Insured Retirement Institute. Sales have declined 27% from a year earlier.

Fixed annuities proved to be the real drag, with sales falling 14.7% to $16 billion. Fixed annuity sales are down a 51.9% from a year earlier.

The survey, conducted with Cerulli Associates, also found that nearly two-thirds of insurers surveyed said they either offer simplified annuities, or plan to do so in the coming 12-18 months.

The survey also indicated that demographic need has tremendous potential to drive variable annuity sales, given the need for guaranteed lifetime income and principal protection that can only be provided by an annuity.

The financial strength rating and living benefits rank top in importance of factors in broker/dealer selection of a variable annuity provider, with both earning a 4.6 on a 5-point scale. Living benefits and the financial strength rating are also highly valued by advisors when selecting a variable annuity provider, with 72% considering living benefits and 80% looking at ratings.

According to the survey, there has been an increase in the consideration of annuities for wealth transfer purposes, particularly to provide retirement income to heirs, while also providing a degree of spendthrift protection.

The Insured Retirement Institute, which is based in Washington, D.C., is a not-for-profit organization and is the source of information pertaining to annuities, insured retirement strategies and retirement planning.