Variable annuities (VA) sales experienced a rough start to 2009—a decline of 26% in the first six months of the year. But, the fourth quarter numbers—up 3% to $32.6 bllion—softened the blow. VA sales were only down 18% for the year, as quarterly VA sales slowly improve from the first quarter, according to LIMRA's U.S. Individual Annuities quarterly sales survey. VA sales totaled $127 billion.
“The last time VA sales were at this level was in 2003, at the end of the last financial crisis,” said Joe Montminy, assistant VP and research director for LIMRA's annuity research. “VA sales experienced significant losses from the third quarter of 2008 through first quarter 2009 and while we are seeing VAs slowly recover, the recovery is slower than expected. We attribute this partly to a decline in 1035 exchanges.”
Overall individual annuity sales fell in the fourth quarter, down 2% as compared the prior quarter, to reach $53.3 billion. This is a 22% decline from the fourth quarter of 2008. Total individual annuity sales declined 11% in 2009, to reach $234.9 billion.
In fourth quarter of 2009, fixed annuity sales continued its decline, down 10% as compared to the prior quarter and down 40% from the fourth quarter of 2008, where fixed annuities experienced incredible growth. Fixed annuity sales totaled $20.7 billion in the fourth quarter and $107.9 billion for the year, which was a 1% decline from 2008. LIMRA predicts fixed annuities will remain depressed as long as interest rates remain at current levels. CDs are just too attractive in this environment, the association says.
In 2009, indexed annuities had a record year, increasing 9%, reaching $29.4 billion, as compared to 2008. Indexed annuities performed very well throughout the year, with a record-high in the second quarter. Indexed annuities fourth quarter sales were down five percent from the third quarter, totaling $6.9 billion.
For the third consecutive quarter, book value declined as compared to the prior quarter, down 10% from the third quarter and 43% as compared to the fourth quarter of 2008. For 2009, sales of book value annuities are up 2% benefiting from a very strong first quarter
Fourth quarter market value adjusted (MVA) fixed annuity sales were down 35% from the third quarter and declined 80% as compared to prior year. 2009 MVA sales finished 20% lower from 2008 totals.
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