Variable annuity (VA) sales rose 16% in the third quarter, totaling $40.2 billion, according to the LIMRAs third quarter 2011 U.S. Individual Annuities Sales survey.

The survey, representing data from 94% of the market, showed that VA sales have grown for six consecutive quarters, with every quarter in 2011 showing double-digit increases over the same period in the prior year.

“While third quarter VA sales were 2% lower than second quarter results, VAs performed significantly better than the market, which was down 15%,” said Joseph Montminy, assistant vice president for LIMRA’s annuity research. “The equity markets in the third quarter were the most volatile we have experienced since the financial crisis began in late 2008, yet consumers’ demand for guaranteed lifetime income helped sustain VA sales.”

In the third quarter, VA guaranteed living benefit (GLB) riders were elected 88% of the time, when a GLB was available at purchase. In the first nine months of 2011, VA sales jumped 18%, to reach $120.9 billion.

Total annuity sales hit $60.4 billion in the third quarter, an increase of eight% compared to prior year. Year-to-date, annuity sales reached $182.8 billion, improving 11% from the first nine months of 2010.

Fixed annuity sales continued to struggle in the current low interest rate environment, falling six% in the third quarter and down one% for the first nine months of 2011. Total fixed annuity sales equaled $20.2 billion in the third quarter and $61.9 billion in the first nine months of 2011. With the Federal Reserve keeping interest rates low, we anticipate total fixed annuities will remain within this trading range for the next couple of years.

Indexed annuity sales in the third quarter matched the record level of $8.7 billion set in the third quarter of 2010, which is an increase of seven% from the second quarter of 2011. In addition, indexed annuities captured 43% of the fixed annuity market, exceeding the more traditional fixed-rate annuity sales (book-value and market-value adjusted), which had 40% market share. LIMRA expects that indexed annuities will have a record year in 2011.

Immediate annuity sales matched the record sales of $2.2 billion set in the second quarter and were up 10% compared to prior year. “The demand for a guaranteed income stream outweighed the low interest rate environment,” added Montminy. “We expect sales of fixed immediate annuities to set new records, exceeding $8 billion in 2011, and will continue to perform well as more of the Boomers without pensions approach retirement and need to create that monthly paycheck.”

Book-value sales dropped seven% in the third quarter, to reach $6.9 billion. This was a 19% decline from second quarter sales. For the first nine months of 2011, book-value sales rose two% to $24.1 billion.

Market-Value Adjusted (MVA) sales plummeted 33% in the third quarter, to $1.2 billion. Year to date, MVA sales have dropped 15%.

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