U.S. annuity sales in the first quarter of 2012 dropped 2.5 percent from the previous quarter.
Sales topped $53.1 billion compared to sales of $54.5 billion during the previous quarter, according to The Insured Retirement Institute, which based its research on data provided by Morningstar Inc. and Beacon Research.
Variable annuity sales were down 2.7 percent to $36.2 billion from $37.2 billion in the fourth quarter of 2011, according to Morningstar. Despite the dip, variable annuities net assets reached an all-time high of $1.61 trillion during the first quarter, a 7.2 percent increase from $1.5 trillion during the fourth quarter of 2011.
"We believe the long-term horizon for the industry looks strong," said Cathy Weatherford, IRI President and CEO. "The markets will always experience its ebbs and flows, but at the same time, we are seeing strength within the fixed annuity market as consumers are turning to income annuities as a source of lifetime income to attain financial security during retirement. The historic level of variable annuity net assets shows that insured retirement strategies are, more and more, becoming the savings vehicle of choice for many consumers."
Fixed annuity sales dipped 2.2 percent to $16.9 billion in the first quarter, compared to $17.3 billion during the fourth quarter of 2011, according to Beacon Research.
The income annuity segment experienced high growth, with sales that rose nearly 23 percent in the first quarter. Indexed annuity first-quarter sales also were higher, with sales up nearly 9 percent compared with the first quarter of 2011. Market-value adjusted annuity sales increased 1.6 percent to nearly $1.37 billion from fourth quarter 2011 sales of $1.34 billion.
"Growing demand for guaranteed retirement income helped push income and indexed annuity sales above year-ago levels," said Beacon Research President Jeremy Alexander. "Market value adjustments enabled carriers to credit a higher rate of interest, and that boosted quarter-to-quarter sales of these products."
According to Morningstar, quarterly net variable annuity sales decreased 34.5 percent year-over-year to $3.8 billion in the first quarter of 2012 from $5.8 billion during the same period in 2011. There were $24.3 billion in qualified sales and $11.8 billion in non-qualified sales in the first quarter.
"While total assets increased more than 7 percent, assets in allocation funds increased slightly more than 13 percent, outpacing the increase in the S&P 500 Index," said Frank O'Connor, Morningstar Director of Insurance Solutions. "Growth in the allocation class is highly correlated with growth in the use of income benefits, because investment in these types of funds is often required when an investor elects a guaranteed income benefit."