Variable Annuity Net Assets Reach All-Time High

June 07, 2012

Income and Indexed Annuity First-Quarter Sales Experience Year-Over-Year Growth

Morningstar and Beacon Research Data Show Slight Dip in Quarter-to-Quarter Industry-Wide Sales

WASHINGTON, D.C. June 7, 2012 - The Insured Retirement Institute (IRI) today announced final first quarter 2012 sales results for the United States annuity industry, based on data reported by Morningstar, Inc. and Beacon Research. Industry-wide first-quarter annuity sales topped $53.1 billion—down slightly more than 2.5 percent from $54.5 billion during the previous quarter.

Variable annuity total 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 annuity net assets reached an all-time high of $1.61 trillion during the first quarter of 2012, a 7.2 percent increase from $1.50 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 for the first quarter dipped 2.2 percent to $16.9 billion from $17.3 billion during the fourth quarter of 2011, according to Beacon Research. There were about $7.3 billion in qualified sales and $9.6 billion in non-qualified sales during the first quarter.

Within the fixed annuity market, the income annuity segment continues to experience higher growth as first-quarter sales rose nearly 23 percent compared with the same period in 2011. 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."

For complete annuity sales reporting data, please access the PDF version of this release.

About Morningstar, Inc.: Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for individuals, financial advisors, and institutions. Morningstar provides data on more than 380,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 8 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment management subsidiaries and has more than $190 billion in assets under advisement or management as of March 31, 2012. The company has operations in 27 countries.

About Beacon Research: Beacon Research is an independent research company and application service provider founded in 1997 and based in Evanston, Ill. Beacon tracks fixed and variable annuity features, rates and sales. Its quarterly Fixed Annuity Premium Study is the first and only source to analyze fixed annuity sales at the product level. Beacon lowers compliance risk and increases fixed annuity sales with 100% carrier-approved, comprehensive product profiles, spreadsheets and search tools for the advisor/rep websites of banks, TPMs, broker-dealers and marketing organizations. Financial institutions use its systems at www.annuitynexus.com for compliance review of 1035 exchanges, sales support, conservation and product research. Beacon also licenses information to other platforms, including Insurance Technologies' VisibleChoiceTM annuity sales platform, Ebix, Lipper, and Ibbotson Associates. Directly and through strategic alliances, Beacon information can be accessed by hundreds of financial institutions and thousands of advisors.

About the Insured Retirement Institute: The Insured Retirement Institute (IRI) is a not-for-profit organization that for twenty years has been a mainstay of service, commitment and collaboration within the insured retirement industry. Today, IRI is considered to be the authoritative source of all things pertaining to annuities, insured retirement strategies and retirement planning. IRI proudly leads a national consumer education coalition of nearly twenty organizations and is the only association that represents the entire supply chain of insured retirement strategies: our members are the major insurers, asset managers, broker dealers and more than 150,000 financial professionals. IRI exists to vigorously promote consumer confidence in the value and viability of insured retirement strategies, bringing together the interests of the industry, financial advisors and consumers under one umbrella. IRI's mission is to: encourage industry adherence to highest ethical principles; promote better understanding of the insured retirement value proposition; develop and promote best practice standards to improve value delivery; and to advocate before public policy makers on critical issues affecting insured retirement strategies and the consumers that rely on their guarantees. Visit www.IRIonline.org today to experience the vast resources of the Insured Retirement Institute for yourself.


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