Variable annuities offer a bright spot

By BenefitsPro

By Paula Aven Gladych

Variable annuity sales showed some improvement in the first quarter, a positive sign for an industry that has been slumping.

Sales of variable annuities topped $34.6 billion in the first quarter, a 0.6 percent increase over the fourth quarter of 2012, according to Morningstar. Variable annuity net sales also showed improvements in the quarter, returning to positive and reaching $900 million after posting a negative $599 million in the fourth quarter.

Industry-wide annuity sales for the quarter reached nearly $49.6 billion, down 2 percent from $50.6 billion the previous quarter and down 6.6 percent from $53.1 billion in the first quarter of 2012.

“The quarter-to-quarter improvement in variable annuity sales is a positive sign for a dynamic industry,” said Cathy Weatherford, president and CEO of the Insured Retirement Institute. “The swing back to positive growth in net sales is similarly a step in the right direction, albeit with room for further improvement.

"It’s worth noting, however, that net flows have been largely affected by outflows from group contracts as a result of an aging workforce rolling out of qualified plans. This reflects the demographic reality that there is a population spike entering their retirement years, bringing with it the opportunity for the industry to deliver retirement income to these consumers.”

Fixed annuity sales totaled $15 billion in the first quarter, down 7.7 percent from $16.2 billion in the fourth quarter and down 11.7 percent from the first quarter of last year, according to Beacon Research.

The downturn in fixed annuity sales was attributed to the difficult interest rate environment, but deferred income annuities increased 150 percent from a year ago.

According to Morningstar, variable annuity total net assets reached a new all-time high of $1.72 trillion in the first quarter, up 4.6 percent from the fourth quarter of 2012 and up 6.5 percent from the first quarter of last year.

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