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.
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.