Annuity Sales Spiked 14 Percent In 2018, No Slowdown In Sight

In 2018, total annuity sales increased 14 percent to $232.1 billion, compared with 2017 results, according to LIMRA Secure Retirement Institute’s Fourth Quarter 2018 U.S. Retail Annuity Sales Survey.

Total annuity sales for the fourth quarter were $62.1 billion, a 22 percent increase over the fourth quarter of 2017.

Fourth quarter 2018 represents the highest quarterly total annuity sales since first quarter 2009, and the first time annuity sales have exceeded $60 billion since the fourth quarter of 2015.

"These are impressive numbers for the fourth quarter across all product lines," said Todd Giesing, director, Annuity Research, LIMRA SRI. "These are the highest numbers that we’ve seen since we started tracking this.

“All fixed annuity products experienced growth in 2018, and fixed annuity sales accounted for nearly 60 percent of overall individual annuity sales, a significant change from just five years ago.”

Total fixed annuity sales were up 47 percent to $37.4 billion in the fourth quarter. For the year, fixed annuity sales rose 25 percent to $132 billion. This is an all-time high for fixed annuity sales.

More Records Broken

Fourth-quarter indexed annuity sales set an all-time quarterly record at $19.5 billion, a 40 percent increase, compared with fourth quarter 2018 results. For the year, fixed indexed annuity sales rose 27 percent to $69.6 billion, compared with prior year.

This is also a record and exceeds the previous annual fixed indexed annuity sales record by $10 billion.

This jump in quarterly sales can be attributed to higher interest rates and increased equity market volatility, Giesing said.

"The rising interest rates are definitely a key factor here," he explained. "When you tie in that mark volatility, it’s not uncommon for us to see a spike in products that have a principle protection."

Fixed rate deferred annuities sales increased 74 percent in the fourth quarter to $12.9 billion. Full year fixed-rate deferred annuity sales for 2018 were $44.2 billion, 29 percent higher than 2017 results.

This is the first time annual fixed-rate deferred sales have exceeded $40 billion since 2009.

Fixed immediate annuity sales rose 29 percent in the fourth quarter to $2.7 billion, which represents the highest quarterly sales recorded for immediate income annuities. For the year, income annuity sales increased 17 percent, to $9.7 billion.

Deferred income annuity sales also increased in the fourth quarter, up 20 percent to $655 million. For the year, DIA sales were 4 percent higher than 2017 results, reaching $2.3 billion.

VA Sales Decline

Variable annuity sales were $24.7 billion in the fourth quarter, down 3 percent compared with prior year results. Total VA sales for 2018 were $100.1 billion, a 2 percent increase over 2017 results. Fixed annuity sales have outperformed VA sales in 10 of the last 12 quarters.

Registered indexed-linked annuity sales topped $3 billion this quarter, an increase of more than 10 percent. For the year, RILA sales will near $11 billion and represent more than 10 percent of total VA sales.

While interest rates helped boost annuity sales, the mid-year fatal blow to the Department of Labor fiduciary rule was also a factor, Giesing said. An appeals court officially tossed out the rule in June.

Still, several states, as well as the Securities and Exchange Commission, are developing best-interest sales rules that will cover annuities. Those rules are not likely to be as influential as the late DOL rule, Giesing said.

"I think there is the potential for disruption for the industry, but initially, looking at some of the regulations on a more deeper scale, it doesn’t seem to have as much of a disruption as the DOL fiduciary rule," he said.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

© Entire contents copyright 2018 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.