The fixed annuity side of the business appears to be in high competitive gear as compared to the variable annuity side.
This is based on a review of year-to-date sales rankings for the top 20 individual annuity carriers for third quarter 2015 -- data provided by the LIMRA Secure Retirement Institute.
In recent years, those quarterly reports have revealed a remarkable trend: The more heated the annuity competition, the more the carriers are likely to see changes in their quarterly sales rankings, both up and down.
The following analysis is based on a comparison of LIMRA’s year-to-date individual annuity sales rankings for third quarter 2015, second quarter 2015, and third quarter 2014.
On the fixed annuity side, it was a competitive quarter. All but three of the fixed carriers on the top 20 list ranked in a different position than they did in second quarter. In addition, all but six changed rank from third quarter one year ago.
This means that 17 carriers saw their rankings change compared to second quarter. Ten of them increased, and seven declined. On a year-over-year basis, 10 fixed carriers got a new rank—five moved up, and five down—and four others nudged out fixed annuity carriers that were among last year’s top 20.
That’s the fixed story: Lots of changes, and some of them big changes.
Compared to the fast moving rapids of the fixed side, the variable annuity business looked like a placid pond. Nineteen of the 20 variable carriers on the top 20 list for third quarter were the same companies as shown on the top 20 list in second quarter, for instance.
When comparing rankings to the same period last year, the top 20 variable carriers did have some changes in rankings—12 of them, in fact. However, with the exception of a new company joining the list (as compared to last year), the changes look more like skips in hopscotch than vaults in leapfrogging. Many of the carriers shifted one or two positions, but no more.
In general, modest changes of this kind are consistent with a sales environment that has been steady but not highly charged or innovative.
The sales results
In its report on third quarter sales, LIMRA noted that the top 20 variable annuity carriers write about 93 percent of variable annuity sales. The variable annuity business is still the sales leader. As LIMRA noted, sales of these policies comprise 54 percent of the overall individual annuity business.
However, that leadership is lessening. For instance, variable annuity market share is down from 67 percent in 2012 and from nearly 72 percent in 2007, based on LIMRA’s year-end statistics. In addition, variable annuity sales in third quarter fell by 7 percent to $32.9 billion from $35.5 billion in third quarter last year. On a year-to-date basis, variable sales were down 4 percent from last year.
LIMRA attributes the fall-off in sales to the negative impact of market volatility.
Meanwhile, volatility was one of the key factors that helped stimulate fixed annuity sales, according to Todd Giesing, assistant research director for LIMRA.
“Despite the decline in rates, fixed annuity writers have been able to offer competitive rates,” he said. “Coupled with the equity market volatility, we believe the safety of fixed products is being seen as a safe haven.”
As it turned out, fixed annuity sales galloped ahead—by 21 percent in third quarter, compared to second quarter. They also rose on a year-to-date basis, by 2 percent, to $74 billion, LIMRA said.
As has been the trend for a while, indexed annuity sales were a major contributor to the fixed results. These sales hit a new quarterly record of $14.3 billion in third quarter, up 22 percent from the same period last year. The sales were also up on a year-to-date basis, by 7 percent to $38.4 billion.
The entire indexed business saw some serious competition. For instance, according to LIMRA, “many companies, rather than just the top players” drove the indexed annuity growth. In addition, all distribution channels increased their indexed sales.
LIMRA singled out the bank channel in particular. It now represents 18 percent of all indexed sales. Notably, the researcher pointed out that “product innovation” contributed to this channel’s growth. The innovation involved “simpler products, without guaranteed living benefit riders.”
In terms of competition, volatility energized the indexed market in particular and the fixed annuity market in general. Innovation followed (and not just in the bank channel). Sales soared, and numerous fixed carriers saw their sales rankings shift.
The trend can be seen even at the leading carriers. On the fixed annuity side, New York Life moved into first place on year-to-date sales of $6.7 billion, while Allianz Life of North America—the fixed sales leader in second quarter and also third quarter last year—dropped to a very close second on year-to-date sales of $6.5 billion.
On the variable annuity side, the sales leader—Jackson National Life—dominated the third quarter on year-to-date sales of nearly $17.8 billion. It ranked in first place in second quarter variable sales and also in third quarter 2014.
InsuranceNewsNet Editor-at-Large Linda Koco, MBA, specializes in life insurance, annuities and income planning. Linda can be reached at email@example.com.
© Entire contents copyright 2015 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.