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Overall Sale of Annuities Continues to Decline Opening the Door for Savvy Investors

Business man pointing to transparent board with text: AnnuityAnnuity FYI, an organization dedicated to providing information and analysis of annuities to the general public, announced last week that the sales of annuities declined by 2.5% from the same quarter a year ago. That makes it the fourth consecutive second quarter-over-second quarter decline, according to Yahoo Finance.

Overall, first half sales in 2015 were down by about $5 billion (4.2%). Annuity FYI received data from the Insured Retirement Institute (IRI), one of the leading associations in the retirement industry.

Second quarter sales of annuities did rise from that of the first quarter, but that’s par for the course. Second quarter annuity sales are typically greater than first quarter due to a variety of reasons, including seasonality and income tax returns.

In total, eight quarters have achieved higher annuity sales than the most recent second quarter of 2015 since 2008. The market has fluctuated greatly ever since the Great recession of 2008.

According to Andrew Murdoch, senior vice president of market research at Annuity FYI, falling annuity sales could be a good thing for consumers. He believes the increased need of insurance companies to find customers in a consistently shrinking market will lead directly to better rates.

“Insurance companies will act because they want the business and can afford to do so,” Murdoch said. “They have culled many higher-cost annuities from their portfolios and have strong balance sheets.”

One of the rare areas of growth in the annuity market is that of fixed indexed annuities (FIAs). The only negative with these is that they generally carry an early withdrawal penalty of up to 7% in the first few years. This type currently accounts for the highest share of annuity revenue, according to the industry news source LifeHealthPro.com.

According to an Athene-sponsored survey, one third of all brokers reported their FIA sales have increased over the past year.

Yahoo! Finance supports this claim as fixed indexed annuities did report their second-best quarter of all-time with a total of $12.6 billion. While the largely held belief is that rates and sales will start to even out in time, the time to take advantage of potential market inefficiencies is now.