1Q Annuity Sales Up Big Year-Over-Year, Down Slightly From 4Q 2018

From Staff Reports

Overall annuity sales fell 3.6% in the first quarter of 2019, with combined sales of fixed and variable annuities of $57.8 billion as compared to sales of $59.9 billion in the fourth quarter of 2018, according to the Insured Retirement Institute, based on data reported by Beacon Research and Morningstar.

However, sales remain solidly above year ago levels, up 17.5% from total annuity sales of $49.2 billion in the first quarter of 2018.

Total Annuity Sales

Fixed annuity sales totaled $37.1 billion in the first quarter, a 0.17 percent decrease from fourth quarter sales of $37 billion. Still, the strong sales were 40.9% higher than 2018 first-quarter sales of $26.3 billion.

Variable annuity sales were $20.7 billion, down 9.8 percent versus 2018 fourth-quarter sales of $22.9 billion.

“As private pensions fade away, annuities are helping retirees and near retirees use their hard-earned savings to create steady, guaranteed, lifetime income,” said IRI President and CEO Wayne Chopus.

According to Beacon Research, fixed annuity sales continue their long-term upward trend, albeit with some product types showing lower sales versus the fourth quarter of 2018.

At $18.1 billion, fixed indexed annuity sales were off recent highs, but significantly higher than this time last year. Sales were down 7.5% versus fourth quarter 2018 sales of $19.6 billion (a record setting quarter).

Still, sales were 24% higher than 2018 first-quarter sales of $14.6 billion, IRI reported.

Book value annuity sales fell 7.4% versus $8.9 billion in the fourth quarter of 2018. But first-quarter sales were 64 percent higher than 2018 first-quarter sales of $5 billion
$6.2 billion -

Market value adjusted (MVA) annuity sales were $6.2 billion in the first quarter, up 51.3% from 2018 fourth-quarter sales of $4.1 billion. MVA sales increased 85.8 percent versus first-quarter 2018 sales of $3.3 billion.

Income Annuity Sales

Income annuity sales were $3.3 billion, up 1.4% from 2018 fourth-quarter income annuity sales of $3.28 billion. Sales were 35% higher than 2018 first-quarter income annuity sales of $2.5 billion.

For the entire fixed annuity market, there were approximately $21.6 billion in qualified sales and $16.1 billion in non-qualified sales during the first quarter of 2019.

“Despite dips driven largely by interest-rate pressure,” said Beacon Research CEO Jeremy Alexander, “the steady long-term increase in fixed annuity sales speaks strongly to the need hard working Americans have for both income and safety of principal.

"This was evident in the first-quarter results that could be attributed to the market volatility experienced in late 2018 as well as during the first quarter. We continue to expect strong growth in the years ahead as these needs remain paramount for retirees and those planning for retirement.”

According to Morningstar, variable annuity net assets rose in the first quarter as equity markets recovered from a period of above average volatility in the fourth quarter of 2018.

At $1.93 trillion, variable annuity assets rose 6.5% from just over $1.8 trillion in the fourth quarter of 2018, as market volatility eased and stocks posted solid gains.

• Allocation funds held $795.6 billion in VA assets, or 41.2% of the total.
• Equity funds held $597.8 billion, or 30.9% of total VA assets.
• Fixed accounts held $339.1 billion, or 17.8%.

Net asset flows in variable annuities were -$24.8 billion in the fourth quarter, 22.5% higher net outflow than $20.3 billion in the fourth quarter of 2018 and 34.6% higher than $18.4 billion in net outflow recorded in the first quarter of 2018.

Within the variable annuity market, there were $12.8 billion in qualified sales and $7.9 billion in non-qualified sales during the first quarter of 2019.

“Heightened volatility in the fourth quarter of 2018 and strong performance in the first quarter of 2019 were both mitigated by the significant percentage of VA assets invested in allocation funds,” said Michael Manetta, senior quantitative analyst at Morningstar. “While still slightly lower than the historic high of over $2 trillion reached in the third quarter of 2018 and despite pressure from negative net asset flow, assets under management in variable annuities are over 80 percent higher than 10 years ago, and we anticipate sales resuming an upward trajectory as newer product types such as structured annuities come into broader use.”