2Q Annuity Sales Bust More Records

Fixed indexed annuity (FIA) sales were $20 billion in the second quarter, 14% higher than prior year results, according to the LIMRA Secure Retirement Institute.

In fact, annuity sales were up sharply again across the board, continuing a sales rebound that began with the defeat of the Department of Labor fiduciary rule early in 2018.

“This quarter’s FIA sales total represents the highest quarterly sales for FIAs ever,” noted Todd Giesing, annuity research director, LIMRA SRI. “Despite declining interest rates, we are forecasting the current momentum of FIA sales to continue through the end of the year and expect sales of FIAs to exceed $70 billion for 2019.”

In the first six months of 2019, FIA sales were $38 billion, an increase of 18%, compared with the first six months of 2018.

Likewise, Wink’s Sales & Market Report recorded a number of positive sales trends apart from FIAs:

• Indexed annuity sales increased by 11% over the prior quarter and by nearly 14% over the same period last year. Indexed annuities have a floor of no less than zero percent and limited excess interest that is determined by the performance of an external index, such as Standard and Poor’s 500.

• Traditional fixed annuity sales declined by nearly 10% over the prior quarter and rose more than 21% over the same period last year. Traditional fixed annuities have a fixed rate that is guaranteed for one year only.

• Multi-year guaranteed annuity (MYGA) sales increased by 15% over the prior quarter and were up nearly 20% over the same period last year. MYGAs have a fixed rate that is guaranteed for more than one year.

• Structured annuity sales declined by 15% over the prior quarter and were up nearly 20% over the same period last year. Structured annuities have a limited negative floor and limited excess interest that is determined by the performance of an external index or subaccount.

• Variable annuity sales increased nearly 17% over the prior quarter. Given that this is the second quarter that Wink has collected data on sales of variable annuities, additional comparisons will be available in future quarters. Variable annuities have no floor, and potential for gains/losses that is determined by the performance of the subaccounts that may be invested in an external index, stocks, bonds, commodities, or other investments.

“Indexed annuity sales in the second quarter had a record quarter, beating their previous record in 4Q 2018 by nearly 3%” said Sheryl J. Moore, author of Wink’s Sales & Market Report. “However, variable annuity sales and structured annuity sales’ increased nearly 20% each. It is a great time to be offering annuities with growth based on an outside benchmark."

Fee-Based Sales

Fee-based FIA sales were $193 million in the second quarter, LIMRA reported. While this marks major growth for this market (188% over prior year), fee-based FIAs hold less than 1% of the total FIA market.

Total annuity sales were $63.9 billion in the second quarter, up 7% compared with the prior year results. This is the highest quarterly sales recorded since the first quarter 2009, and the third consecutive quarter where total annuity sales surpassed $60 billion.

Year to date, total annuity sales were $124.8 billion, an increase 11%, compared with results from the first half of 2018. Fixed annuities represented 60% of the total annuity market in the second quarter. Fixed annuity sales have outperformed VAs sales in 12 of the last 14 quarters.

After two consecutive quarters of declines, LIMRA recorded VA sales at $25.8 billion, level with second quarter 2018 results. For the first six months of the year, VA sales were $48.6 billion, down 4%, compared with prior year results.

Traditionally, the second quarter is when VA sales are the strongest. LIMRA SRI expects increasing market volatility and falling interest rates will dampen VA sales for the remainder of the year. LIMRA SRI is forecasting total VA sales to be under $100 billion for 2019.

Fee-based VA sales were $725 million in the second quarter. While this is down 15% from prior year, it is 10% higher than first quarter 2019 results. Fee-based VA sales represented 2.8% of the total VA market in the second quarter.

In the second quarter, registered index-linked annuity (RILA) sales were $4.14 billion, up 66% from prior year results. Year to date, RILA sales were $7.7 billion, 63% higher than results from the first half of 2018.

“While RILA sales have been driving overall VA sales growth recently – representing 16% of the total VA market – after two consecutive quarters in the $3.5 billion range, sales vaulted up,” Giesing said. “Heightened equity market volatility and the fact that major distributors have RILA products on the shelves helped RILA sales break through this plateau.”

Deferred Annuity Sales Bump

Despite the considerable decline in interest rates this quarter, fixed-rate deferred annuity sales rose 10% in the second quarter to $13.1 billion. In the first six months of 2019, fixed-rate deferred annuity sales totaled $28.2 billion, 35% higher than prior year results.

“The 10-year treasury rate dropped nearly 50 basis points from the start of the second quarter,” said Giesing. “While we didn’t see significant impact on the fixed-rate deferred annuity market during the second quarter, there is usually a lag between in interest rates drops and sales declines. We anticipate sales to substantially drop in the third and fourth quarters.”

Single-premium immediate annuities (SPIA) sales totaled $2.7 billion, up 8% from prior year. Year to date, SPIA sales were $5.5 billion, 20% higher than prior year.

“Traditionally, SPIA sales are strongly linked to interest rates. However, we see another dynamic coming into play,” Giesing remarked. “Over the past year, a growing portion of the assets invested in SPIAs are qualified assets. This is likely due to the rise in the number of individuals who are reaching the age for taking required minimum distributions, and choosing to convert a portion of their qualified assets into guaranteed income.”

Deferred income annuities (DIA) sales grew 26% in the second quarter, to $727 million. In the first six months of the year, DIA sales totaled $1.4 billion, 25% higher than prior year.