Annuity Sales Continue Decline In Third Quarter, Pressured By Low Interest Rates

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Annuity sales continued to decline during the third quarter, driven by a low-interest-rate environment that has companies cutting back on benefits and increasing prices, which affects customers’ demand for the financial product.

Annuities require that a customer deposit money in order to get a steady, regular series of payments in the future. Sometimes annuities are used to replace income during retirement. Insurers that sell annuities invest the deposits and are less able to make a return in a low-interest environment.

“Protracted low-interest rates have impacted all lines of the annuity business, causing manufacturers to reassess their exposure among various product lines,” Joe Montminy, assistant vice president and director of LIMRA annuity research, said in a prepared statement. “The sustained uncertain economic environment has many companies implementing conservative risk management strategies in an effort to prudently manage their business.”

Annuity sales were $54.3 billion for the third quarter, according to a U.S. Individual Annuity Sales survey by Windsor-based LIMRA, which conducts financial research for its member companies in the life insurance and annuity business. The sales figures represent data from 95 percent of the market, LIMRA said.

During the first nine months of this year, annuity sales were down 8 percent compared with last year, to $166.1 billion.

Companies such as Prudential Financial, MetLife, Lincoln Financial Group, AXA Equitable and Massachusetts Mutual Life all sell annuities and have some company operations in Connecticut.

The industry report included the following:

  • Variable annuity sales declined 8 percent to $36.6 billion; variable annuity sales were down 7 percent to $112 billion for the first nine months of the year.
  • Fixed annuity sales fell 13 percent in the third quarter to $17.7 billion — a level not seen since 2007.
  • Indexed annuity sales were $8.7 billion during the quarter, and up 6 percent for the first nine months of the year at $25.4 billion. LIMRA said indexed annuities are strong and will have a record-breaking year in 2012.

About Matthew Sturdevant

Full-time staff journalist at The Hartford Courant and magazine freelancer with a master's degree in writing from Dartmouth. My work has appeared in The Los Angeles Times, The Chicago Tribune, Taiwan News, The Baltimore Sun and many other news sources. My blog has been referenced by Politico.com, the Kaiser Family Foundation, the Georgetown Law Library and a number of organizations in healthcare and business. Sturdevant’s blog is "a well-written wealth of ideas," said The Donald W. Reynolds National Center for Business Journalism, (businessjournalism.org, May 18, 2011). I have experience writing for newspapers, magazines, Web sites and blogs as well as shooting and editing video. I made regular appearances on news-talk radio and on the NBC affiliate station in Corpus Christi, Texas. I made occasional appearances on the Fox affiliate in Connecticut promoting Hartford Courant articles.

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