Annuity sales fell in the third quarter of 2019, decreasing 8.4% as the combined sales of fixed and variable annuities totaled $55.7 billion as compared to sales of $60.8 billion in the second quarter of 2019, according to the Insured Retirement Institute.
IRI released final third-quarter 2019 market data for the U.S. annuity industry based on data reported by Beacon Annuity Solutions and Morningstar, Inc.
Sales were on par with year ago levels, down just 0.4% from total annuity sales of $55.9 billion in the third quarter of 2018. Total annuity sales on a year-to-date basis totaled $174.3 billion, up 7.5% versus third quarter 2018 year-to-date sales of $162.2 billion.
Fixed Annuity Sales
• Fixed annuity sales totaled $30.1 billion in the third quarter, a 16% decrease from second quarter sales of $35.8 billion. FA sales were 5.5% lower than 2018 third-quarter sales of $31.8 billion.
• Year-to-date fixed annuity sales of $101.8 billion represent a 14.1% increase over sales of $89.2 billion in the year-to-date period ending September 30, 2019.
According to Beacon Annuity Solutions, fixed annuity sales are off recent highs, but fixed indexed and market-value adjusted annuities are higher than in the same period last year.
• Fixed indexed annuity sales totaled $18.2 billion in the third quarter, a 9% decrease from second quarter sales of $20 billion. FIA sales were 5.5% lower than 2018 third-quarter sales of $31.8 billion.
• FIA sales were nearly identical to the $18 billion in sales for the third quarter 2018.
Variable Annuity Sales[i]
• Third-quarter variable annuity sales totaled $25.6 billion, up 2.4% versus 2019 second-quarter sales of $25 billion, and 6.2% higher than 2018 third-quarter VA sales of $24.1 billion.
• Year-to-date VA sales of $72.5 billion represent a 0.7% decrease over sales of $73 billion in the year-to-date period ending September 30, 2019.
“Demographics continue to favor growth in the use of annuities for guaranteed lifetime income and protection against market downturns,” said IRI President and CEO Wayne Chopus. “We remain optimistic for growth in 2020 and beyond.”
Book value annuity sales totaled $4.1 billion, a 43.3% decline versus $7.2 billion in the second quarter of 2019. Third quarter sales were down 41% from 2018 third-quarter sales of $7 billion.
Market value adjusted (MVA) annuity sales of $5 billion were down 3.8% from 2019 second-quarter sales of $5.2 billion, but up 22% versus third-quarter 2018 sales of $4.1 billion
Income annuity sales of $2.7 billion were down 18.1% from second-quarter sales of $3.3 billion. Sales were flat versus third-quarter 2018 sales of $2.7 billion.
For the entire fixed annuity market, there were approximately $17.4 billion in qualified sales and $12.7 billion in non-qualified sales during the third quarter of 2019.
“The inverted yield curve, along with declining corporate bond yields, continued to apply downward pressure on overall third-quarter fixed annuity sales. In addition, fixed indexed annuities suffered from higher hedging costs due to market volatility,” said Beacon Annuity Solutions CEO Jeremy Alexander. “We anticipate next quarter sales to be flat with an upward bias given the steepening yield curve, as well as rising corporate bond rates and lower market volatility.”
According to Morningstar, variable annuity net assets fell in the third quarter on lower investment returns and negative net asset flows. At $1.95 trillion, VA assets fell 0.5% from $1.96 trillion in the second quarter of 2019.
Allocation funds held $796.8 billion in VA assets, or 40.9% of the total, falling below the $800 million mark. Equity funds held $597 billion, or 30.7% of total VA assets, while fixed accounts held $351.2 billion, or 18% of VA assets.
Net asset flows in variable annuities were -$21.4 billion in the third quarter, up from -$20.4 in the second quarter but an improvement over outflows of $24.8 billion in the first quarter. Within the VA market, there were $16.7 billion in qualified sales and $8.9 billion in non-qualified sales during the third quarter of 2019.
“Structured annuities continued to gain market share in the VA space,” said Michael Manetta, senior quantitative analyst at Morningstar. “With more than a decade having passed since a significant stock market correction, this growth likely reflects investor interest in products that offer some form of downside protection to the account value.”