Here’s some good news for agents selling fixed annuities: the products paid a bit more in the first quarter than they did last year.
The difference was slight, and probably not enough to pay off the mortgage.
But small numbers add up, particularly when overall sales volume jumps, as it did for indexed annuities this quarter, according to Wink’s Sales & Market Report.
- The indexed annuity commission received by the agent averaged 6.26 percent of premium for the first quarter of 2018; an increase of 0.13 percent as compared to last quarter. In the first quarter of 2017, average indexed annuity commissions were 6.2 percent.
- The fixed annuity commission received by the agent averaged 4.18 percent of premium for the first quarter of 2018, up 0.13 percent compared to last quarter. In the first quarter of 2017, average fixed annuity agent commission was 3.9 percent.
- Average agent commission on a multiyear-guaranteed annuity (MYGA) was 2.29 percent of premium for the first quarter of 2018; down 0.11 percent compared to last quarter. In the first quarter of 2017, average MYGA agent commission was 2.3 percent.
Indexed Annuities: Commissions Up, Sales Up
Agents selling indexed annuities did well on two fronts.
Not only did their indexed annuity commissions rise, they sold a lot more indexed annuities as well compared with the year-ago quarter and compared to the fourth quarter of last year, Wink reported.
First quarter indexed annuity sales rose 10 percent to $14.2 billion compared to the year-ago period, and sales were up 4.4 percent compared to the fourth quarter.
“We haven’t had an increase in indexed annuity this big in nearly two years,” said Sheryl J. Moore, president and CEO of Moore Market Intelligence and Wink Inc., publisher of Wink’s Sales & Market Report.
“I look forward to seeing how improvements in interest rates will affect sales throughout the remainder of 2018,” she also said.
With regulatory challenges now behind them, indexed annuity sales are expected to resume upward momentum and possibly even break sales records set in 2016, analysts said.
Fixed Rate Annuities: Commissions Up, Sales Down
Agents weren’t as blessed with sales of traditional fixed annuities, where commissions rose but sales volume fell.
First quarter sales of traditional fixed annuities fell 32 percent to $730 million compared to the year-ago period, and sales were down 3.3 percent when compared to the previous quarter, Wink reported.
Traditional fixed annuities lock in an interest rate for a year.
With many economic signals pointing to higher interest rates over the coming months, some analysts see buyers be holding off for better yield down the road.
Other analysts like Moore offer a simpler explanation.
Interest rates are still low historically speaking so sales simply reflect that.
“Fixed annuities and MYGAs are commoditized so when rates are crummy, sales are crummy,” Moore said.
MYGAs: Commissions Down, Sales Down
MYGAs, which have a fixed rate that is guaranteed for more than one year, found themselves laggards with two strikes against them in the first quarter.
Agent commissions on MYGA sales fell and sales volume also fell, according to Wink.
First quarter MYGA sales fell 10 percent to $8.1 billion compared with the year-ago quarter, but rose 21 percent when compared to the fourth quarter, Wink reported.
First quarter non-variable deferred annuity sales, an umbrella term that includes indexed annuities, traditional fixed annuities and MYGA product lines, were flat (up 0.2 percent) at $23 billion compared with the year-ago period.
Sales of non-variable deferred annuities rose 9.4 percent compared to the fourth quarter, Wink also reported.
Participating in the 83rd edition of Wink’s Sales & Market Report for the first quarter, 2018, were 60 indexed annuity companies, 64 fixed annuity companies, 74 MYGA providers, and six structured annuity companies.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected]
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