First-quarter annuity sales fell more than 2.5% to $53.1 billion, according to a report issued by the Insured Retirement Institute (IRI) Thursday.

Variable annuity sales also fell, dropping 2.7% to $36.2 billion. However, IRI reported that net assets reached an all-time high of $1.61 trillion, up 7.2% from the fourth quarter of 2011. Net sales fell more than 34% year over year to $3.8 billion.

Meanwhile, fixed annuity sales fell 2.2% to just under $17 billion and took in $7.3 billion in qualified sales and $9.6 billion in nonqualified sales. Income annuities were especially strong, growing 23% over the first quarter of 2011. Indexed annuity sales, while not as strong as income annuities, also increased from the first quarter of last year, rising 9%.

IRI's quarterly report is based on data reported by Morningstar Inc. and Beacon Research. Chicago-based Morningstar provides independent investment research. IRI is a not-for-profit organization that monitors the insured retirement industry.

Cathy Weatherford, the president and CEO of IRI, predicted that the long-term horizon for the industry is strong. "The markets will always experience its ebbs and flows," she said, but she added that consumers are turning to income annuities as a source of lifetime income.

Jeremy Alexander, president of Beacon Research, said that growing demand for guaranteed retirement income helped push income and indexed annuity sales above last year's levels. "Market value adjustments enabled carriers to credit a higher rate of interest, and that boosted quarter-to-quarter sales of these products," he said.

--Jim McConville