(Dow Jones) Annuity sales in the first quarter declined 27% from the year-ago period, but sales of variable annuities rose modestly, a sign that investors appear to be stepping back into the market.
The Insured Retirement Institute, an organization of annuity providers, released for the first time Tuesday combined variable-annuity sales data from investment-research firm Morningstar and fixed-annuity sales data from research company Beacon Research.
Sales of annuities in the first quarter were $47.4 billion, down from $50.9 billion in the fourth quarter; they were down 27% from $64.4 billion in the first quarter of 2009, the group said.
Sales of fixed annuities declined 15% to $16 billion in the first quarter from the fourth quarter, and 52% from the first quarter last year, according to the data. In contrast, first-quarter sales of variable annuities were down 1.5% from fourth-quarter levels to $31.4 billion, but up 3% from the first quarter of 2009, the group said.
There was continued strength in sales of products with "robust living benefit guarantees," Frank O'Connor, director of insurance solutions at Morningstar, said in a statement. Products that offer guaranteed-withdrawal benefits with step-ups and bonus credits represented most of the sales, a reflection of variable annuity investors' desire for higher returns in a low-rate environment coupled with a willingness to exchange a percentage of their potential returns for the protection those benefits offer, Mr. O'Connor said.
Cathy Weatherford, president and chief executive of the Insured Retirement Institute, said in an interview, "The downward trend was in fixed annuities." A year ago, there was "this tremendous flight to safety and security, and the fixed annuity offered that level of safety," she said. Now, investors want to "participate a bit in the markets with little downside; those living benefits provide that."
Fixed annuities guarantee that a specific sum of money will be paid each period, generally on a monthly basis, regardless of fluctuations in the value of the underlying investments. Variable annuity payments are based on the portfolio of stocks in which the issuer invests. The payment will change, depending on the performance of those investments.
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