RJ and Makay

With the recession and bear market still fresh in their minds, Americans are increasingly opting for savings vehicles with safety features such as a guaranteed income stream in retirement. Their need for more security has pushed demand for annuity products, especially variable annuities, to record highs.

For example, fourth-quarter variable annuity sales totaled $37.6 billion, a 10% increase from the previous quarter and an 18% gain from the fourth quarter of 2009, reports the Insured Retirement Institute (IRI). Variable annuity assets reached an all-time high of $1.5 trillion last year, the IRI adds.

For the second consecutive year, indexed annuities had record sales that reached $32.1 billion for all of 2010, says financial services research and consulting firm LIMRA. The increase was 7% more than in 2009, reports LIMRA, which tracks 96% of annuity sales.

In the fourth quarter of last year, indexed annuity sales improved 17% to $8.2 billion. Furthermore, indexed annuities accounted for 43% of fixed annuity sales in the fourth quarter — the first time ever that indexed annuities outperformed fixed-rate deferred annuities products, which generated 40% of fixed annuity sales in the fourth quarter.

Thanks to surging equities and greater demand for guaranteed income riders, variable annuity (VA) sales jumped 10% last year to $140.5 billion — their highest level in two years. Annuity sales dropped 7% overall last year, though, mainly because of a weak market for fixed annuities, reports financial services research and consulting firm LIMRA.

“We attribute the growth [in VA sales] to increased confidence in the VA market by consumers, advisors, and the companies themselves,” says Joseph Montminy, assistant vice president of annuity research at LIMRA. “We saw growth in almost two-thirds of the VA industry in 2010.”