Although total annuity sales dropped 8 percent in the first three months of 2012 compared with last year, MetLife was the top seller of annuities with $5.5 billion in sales, while Prudential was the top seller of variable annuities with $4.9 billion in sales, followed by Allianz Life of North America, which sold $1.4 billion in fixed annuity sales, according to new data.
LIMRA, previously known as Life Insurance Marketing and Research Association, found that fixed annuities dropped 10 percent in the first quarter to $18 billion compared with variable annuity sales, which dropped seven percent to $36.8 billion.
“Declining annuity sales is not an indictment of the industry or annuity products but more of a reaction to the economy. It has been a very difficult economic environment. The combination of persistent low interest rates and high volatility is a challenging environment for the annuity industry,” said Joseph Montminy, LIMRA assistant vice president of annuity research.
Variable annuities sustained overall sales the past eight quarters with variable annuity guaranteed lifetime withdrawal benefit (GLWB) election rates hovering at 90 percent the last six months. In the third quarter 2011, the election rate was 88 percent, according to LIMRA data. The GLWB rider offers the ability to receive guaranteed lifetime income without requiring the owner to annuitize the contract.
“Variable annuity GLWBs are very popular with consumers. Just like in any other market, consumers choose products that offer them the features they desire at the best price. GLB riders differentiate specific variable annuity products,” Montminy told Insurance Networking News.
For the third-consecutive quarter, indexed annuities outperformed traditional fixed annuities, capturing 45 percent of the fixed annuity market and jumping 14 percent to 8.1 billion in sales, according to LIMRA.
“Indexed annuities are just fixed annuities with a different manner of crediting interest. This potential for additional interest is increasingly important in today’s low-interest environment,” said Kim O’Brien, National Association for Fixed Annuities (NAFA) president and CEO. “The rate of interest on indexed annuities may vary depending on the index performance but can never fall below zero.”
The Top 20 Writers of U.S. Individual Annuity Sales during the first quarter of 2012 include Jackson Life, Prudential Annuities, TIAA-CREF, AIG Companies, Lincoln Financial Group, Allianz Life of North America, AXA Equitable, New York Life, Riversource Life Insurance, Nationwide, Pacific Life, Aegon, AVIVA, American Equity Investment Life, Thrivent Financial for Lutherans, Great American, Protective Life, Fidelity & Guaranty Life and Principal Life Insurance.
“These companies offer products that are attractive to consumers. Many have been leaders for some time and continue to lead their product type,” said Montminy. “The way any company wins market share is to offer products that are competitive with those offered by the sales leaders.”
Fixed immediate annuity sales were relatively flat in the first quarter with $1.8 billion in sales.
“We believe the focus of the Presidential administration and current politicians’ positions on annuities and preparing for retirement along with the Department of Labor’s interest in annuity payout disclosure and the opening 401k market to annuities are all strong indicators that fixed annuity sales will be a growing part of America’s retirement plans going forward,” O’Brien said.