Fee-Based Annuity Sales on the Rise at Lincoln

Sales of all types of fee-based annuities sold by Lincoln Financial totaled $79 million in the third quarter, nearly as much as the company's entire fee-based annuity sales in 2016, the company's CEO said last week.

The sales bump might be an indicator of rising acceptance of fee-based products in light of tightened regulation. Lincoln sells fee-based variable and indexed annuities.

Third-quarter annuity sales dripped 1 percent to $1.9 billion compared to the year-ago quarter, Lincoln Financial said.

Fee-based sales are not separately broken out in the company's filings, but Dennis R. Glass, president and CEO of Lincoln Financial, touted their success in a conference call with analysts.

A living benefit rider – Max 6 Select – introduced late in the second quarter, added nearly $50 million to annuity sales in the third quarter, he said.

The tweaks have resulted in market share gains as consumers benefit from more product choices and flexibility, and as more advisors benefit from fee-based compensation options, Glass said Thursday.

The comments offer insights from a top annuity seller and serve as a barometer of sorts for the performance of annuity products, roiled by new fiduciary rules over the past several quarters.

The Department of Labor regulations are designed to encourage fee-based product sales into a world built around the commission-based model.

Fee-based annuity sales are growing, but still only make up a sliver of overall annuity sales, industry data indicate.

Variable annuity sales without guaranteed living benefits rose 23 percent to $573 million in the third quarter compared to the year-ago period, filings show.

Sales of variable annuities with guaranteed living benefits fell 9 percent to $959 million in the third quarter compared with the year-ago period, the company said.

Net Flows Sink 18 Percent

Annuity net flows dropped 18 percent to $1 billion in the third quarter compared with the year-ago period, company filings show.

“We clearly have more work to do to get back to positive net flows, but we remain confident in our ability to further build sales in the near term,” Glass said.

Industrywide sales of variable annuities in 2017 are expected to dip below the $100 billion mark for the first time since 1998, according to industry tracker LIMRA.

Variable annuity sales last year were $105 billion, but sales are forecast to dip no more than 5 percent in 2018 after several difficult years, accordign to LIMRA analysts.

A Wall Street analyst expressed surprise at Lincoln Financial’s weak third-quarter sales of indexed annuity, but the drop reflected the rising and falling patterns of indexed annuities in any period, Glass said.

October sales, which don't appear in third-quarter earnings reports, was strong for individual annuity sales, Glass said.

Lincoln Financial Beats Street in Q3

Lincoln Financial reported third-quarter profit of $418 million. On a per-share basis, the company reported net income of $1.87. Earnings, adjusted for non-recurring costs, were $2.03 per share, the Associated Press reported.

The results exceeded Wall Street expectations. The average estimate of six analysts surveyed by Zacks Investment Research was for earnings of $1.84 per share.

The insurance and retirement business posted revenue of $3.51 billion in the period.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at cyril.tuohy@innfeedback.com.

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at cyril.tuohy@innfeedback.com.