Annuity sales in the US got off to a
bad start in the first quarter of 2010, coming in at $47.4bn, down
6.9% from $50.9bn in the previous quarter and 27% on the first
quarter of 2009.

Declines were registered in both the
fixed and variable annuity sectors.

Data was supplied by the Insured Retirement
Institute (IRI) and for the first time combines fixed annuity data
from fixed annuity research firm Beacon Research and variable
annuity data from financial information specialist Morningstar.

The IRI is a non-profit body which promotes
fixed and variable annuities among  consumers and aim to
improve product and service quality from insurers and advisers.

The steepest decline in activity in the first
quarter of 2010 was seen in the fixed annuity sector where sales
fell 14.7% compared with the previous quarter, from $19bn to

On a year-on-year basis the damage was far more
severe with sales down 51.9% from $34bn in the first quarter of

 “It appears that prospective buyers
expected higher rates in the future and did not want to lock in
first quarter’s credited rates,” said Beacon Research CEO Jeremy

“A year ago, fixed annuity sales hit a record
high because of the flight to safety and strong fixed annuity rate
advantage. It is not surprising that year-over-year results were
down substantially.”

In the variable annuity sector sales in the
first quarter of 2010 of $31.42bn were down a mere 1.5% from
$31.89bn in the previous quarter while compared with the first
quarter of 2010 they registered a small increase of 3.2%, from

 “While total sales were down from
fourth-quarter levels, we saw continued strength in the sales of
products offering robust living benefit guarantees,” said
Morningstar director of insurance solutions Frank O’Connor.

“Products offering lifetime guaranteed
withdrawal benefits with value enhancers such as step-ups and bonus
credits represented the lion’s share of sales. This is a reflection
of the variable annuity investor’s desire for higher returns in a
low rate environment coupled with a willingness to exchange a
percentage of those potential returns for the protection offered by
these benefits.”

On a net basis, variable annuity sales in the
first quarter of 2010 totalled $2.9bn, down 0.2% compared with the
previous quarter. However, compared with the first quarter of 2009
net sales were down a significant 43%, from $5.09bn.


Fixed annuities: US sales – Q1 2008-Q1 2010