Fixed-annuity sales surged in 2013

Sales of such products help annuities overall enjoy a strong year

Mar 27, 2014 @ 12:34 pm

By Carl O'Donnell

+ Zoom

The U.S. annuity industry enjoyed a strong year in 2013, with sales increasing 4.2% over 2012 to $220.9 billion, mostly as a result of growing demand for fixed annuities, according to a report by The Insured Retirement Institute.

Sales of fixed annuities in 2013 grew 16.6% to $78.1 billion. This surge was sufficiently robust to offset a decline in variable annuity sales, which dipped 1.5% to $142.8 billion.

This growth is a bit surprising, since the spread between the interest rates of bonds and annuities actually narrowed last year, said Jeremy Alexander, president of Beacon Research. Typically, this would be unfavorable for annuities.

One possibility is that demand for these products is being propped up by the growing number of people nearing retirement age. Additionally, annuities are becoming increasingly popular with younger investors, he said.

“Younger people have gone through a mess of a recession and this may have effected their risk profile,” Mr. Alexander said. “When you see a parent or loved one or friend have to work in retirement, it changes the way you think about life.”

The biggest drivers of 2013’s growth in sales were market-value-adjusted annuities, which saw a 41.4% increase to $6.7 billion.

Income annuities and indexed annuities were also popular. Income annuity sales grew 23.3% in the fourth quarter to $3.5 billion. Indexed annuity sales rose 17% to $11.8 billion.

“Income annuities were clearly benefiting from retirement income,” Mr. Alexander said. “We have seen tremendous growth percentage-wise and they continue to make up more and more of the market.”

Despite last year’s slowdown, the net assets in variable annuities still reached an all-time high of $1.87 trillion

0
Comments

What do you think?

View comments

Recommended for you

Featured video

Events

Pershing's Dolly: 3 challenges facing advisers ahead

What are the biggest challenges facing financial advisers today? Pershing Lisa Dolly explains some of the hurdles, and how great advisers are overcoming them.

Video Spotlight

Will It Last As Long As Your Clients Do?

Sponsored by Prudential

Video Spotlight

The Catalyst

Sponsored by Pershing

Latest news & opinion

Nationwide's 401(k) record-keeping fees are excessive, lawsuit claims

Plaintiffs claim practice of charging plans a percentage of assets is unreasonable.

Wealth management firms struggle with lower fees, fewer new clients

Advisers in North America earned less from clients last year and saw a decline in average fees, according to a new report by PriceMetrix.

These investors are allowed to put $500K into a Roth IRA at once

The HEART Act permits rolling all or part of life-insurance and combat-related-fatality payouts directly into the tax-free retirement plan, but few take advantage.

Labor's Alexander Acosta and SEC's Jay Clayton tell lawmakers they will work together on fiduciary rule

In separate appearances before Senate panels, the regulators stressed the cooperation that Republican legislators and opponents of the DOL fiduciary rule are demanding.

Brian Block denies cooking the books at Schorsch REIT

Former CFO claims everything he did was 'appropriate' and 'correct.'

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print