3Q Annuity Sales Down 8% Year-Over-Year, LIMRA Reports

By Staff Reports

Total annuity sales were $54.8 billion in the third quarter, up 13% from the second quarter, but down 8% from 3Q 2019, according to preliminary results from the Secure Retirement Institute U.S. Individual Annuity Sales Survey.

“Annuity manufacturers and distributors have largely overcome the operational hurdles caused by COVID-19 and social distancing measures, which has helped improve sales of most product lines, compared with second quarter results,” said Todd Giesing, senior annuity research director, SRI. “However, extremely low interest rates and continued market uncertainty are keeping many investors on the sidelines. As a result, the annuity market remains below 2019 sales levels.”

While total variable annuity (VA) sales dropped 10% in the third quarter to $23.9 billion, this was 7% higher than second quarter results. VA sales were $70.7 billion in the first nine months of 2020, down 6% from the first three quarters of 2019. SRI is forecasting VA sales to remain steady in the fourth quarter and to reach $89-$94 billion by the end of 2020.

Registered index-linked annuity (RILA) sales jumped 33% to $6.4 billion. This marks the 23rd consecutive quarter over quarter growth for RILA sales. Year-to-date, RILA sales were $15.8 billion, up 26% from 2019 results.

“In this economic environment, RILA products are very attractive to investors seeking downside protection with greater growth potential,” Giesing said. “In addition, we are seeing more carriers enter the RILA market, also spurring RILA growth.”

Total fixed annuity sales were $30.9 billion in the third quarter, 11% higher than second quarter but 6% below prior year’s results. In the first nine months of 2020, fixed annuity sales dropped 19% to $88.5 billion. Fixed annuities represented 56% of the total U.S. annuity market.

Fixed indexed annuity (FIA) sales continued to falter in the third quarter. FIA sales fell 29% to $13.2 billion. Year-to-date, FIA sales totaled $41.4 billion, falling 27% compared with prior year.

Fixed-rate deferred annuity sales were $14.6 billion, up 47% from third quarter 2019. Year-to-date, fixed-rate deferred annuity sales totaled $37.2 billion, 2% lower than prior year results.

“Fixed-rate deferred annuities recorded the second highest sales since the Great Recession. For investors seeking a safe place to put their money during this period of increased volatility, there isn’t another product that can compete with fixed-rate deferred crediting rates, which are, on average, 50 basis points higher than CDs,” noted Giesing. “That said, demand for this product declined as the quarter unfolded. We expect fixed-rate deferred annuity sales will drop to $10-$12 billion in the fourth quarter but overall sales should be level with or exceed 2019 sales results, despite the challenging interest rate environment.”

Historically low interest rates continue to undercut income annuity sales. Single premium immediate annuities (SPIAs) were $1.2 billion in the third quarter, 14% below second quarter results and 48% below third quarter 2019. This is the lowest quarterly level of SPIA sales in 16 years. Year-to-date, SPIA sales were $4.5 billion, down 42% compared with sales results from the first nine months of 2019.

Deferred income annuity sales (DIA) fell 31% in the third quarter to $410 million. Year-to-date, DIA sales were $1.23 billion, dropping 37% from prior year results.

“Income is expensive under current market conditions. Investors are likely waiting for interest rates to improve before purchasing an income annuity,” said Giesing.

Preliminary second quarter 2020 annuities industry estimates are based on monthly reporting, representing 88% of the total market.

The top 20 rankings of total, variable and fixed annuity writers for the first half of 2020 will be available around mid-November, following the last of the earnings calls for the participating carriers.