FIA Sales Rise In Otherwise Tough 1Q

All but two annuity lines saw sales fall in first quarter 2015 over first quarter last year, according to sales estimates from LIMRA Secure Retirement Institute (LIMRA SRI).

The two product stars were fixed index annuities (FIAs) on sales of $11.6 billion, and structured settlements on sales of $1.4 billion. Sales for these products increased even though total fixed annuity sales of $22 billion dropped by 8 percent compared to first quarter 2014.

It was a quarter of drops. For instance, total variable annuity sales fell by 5 percent to $32.4 billion from the same year-earlier period. And fixed and variable performance combined produced an industrywide decline of 7 percent to $54.4 billion compared to last year’s first quarter combined sales of $57.7 billion.

The quarter saw the gap between variable and fixed annuity products narrow a bit more than before. Variable annuity sales now represent 58 percent of total market and fixed annuities, 42 percent. In first quarter last year, the market shares were 59 percent/41 percent respectively, and in 2013, the shares were 68 percent/32 percent.

Not unexpected

The down numbers are not unexpected. As Todd Giesing put it, “persistent low interest rates and market volatility in the first quarter had an impact on all product lines.” He is senior business analyst at LIMRA SRI.

Even FIAs felt the effects. For instance, even though the FIA industry increased sales by 3 percent over last year’s first quarter results of $11.3 billion, that increase is modest compared to the FIA industry’s outsized increase in first quarter last year, when FIA sales surged 43 percent over first quarter 2013, according to LIMRA SRI figures.

However, the 2015 performance for first quarter FIA sales still stands out. This is for two reasons. One is that the sales grew despite very difficult market conditions for annuities in general. The other is that first quarter 2015 is the eighth consecutive quarter of increased sales for FIAs, according to LIMRA SRI.

The downside protection/upside potential characteristics of FIAs appear to be continuing to hold sway with consumers.

Ranked by percentages, structured settlement annuity products made bells ring in first quarter too. Their estimated sales were up 23 percent over first quarter last year, according to LIMRA SRI’s numbers. But the volume was comparatively small — $1.4 billion for the quarter — so this sector’s impact on overall industry results is also comparatively small.

A review of the LIMRA SRI sales estimates for the top 20 variable and fixed annuity companies provides some insight into how these markets fared.

Variable sales

On the variable annuity side of the business, 14 of the top 20 carriers reported sales declines while only four reported increases. Of the remaining two, one remained essentially level with its first quarter sales last year, and one (18th-place Forethought Annuity) was new to the list.

Even the top-ranked variable annuity seller, Jackson National Life, reported a decline — to $5.4 billion from $6.4 billion in first quarter last year. TIAA-CREF came in second at $3.2 billion, an increase over its first quarter sales last year. AIG Companies came in third with sales of $4.8 billion, a decrease from the same period last year.

In terms of billions, 10 of the top 20 sellers had production of over $1 billion. That’s down from 11 in that category last year.

In terms of rankings, 11 of the top 20 variable annuity carriers held the same numeric rankings they held one year ago. By comparison, on a year-over-year basis, nine carriers held their same year-end rankings on the LIMRA SRI top 20 list for all of 2014, as compared to year-end 2013, while 10 others changed rankings.

That more than half of the top 20 variable annuity carriers have kept their same first quarter positions as one year ago, and that 14 reported sales declines for the quarter, suggest the variable carriers are sitting tight as they weather tough conditions.

Fixed sales

On the fixed annuity side of the business, there was a similar pattern, although less pronounced. Ten of the top 20 fixed sellers reported sales declines from first quarter a year ago, while seven reported sales increases.

The top three fixed annuity sellers — Allianz Life, New York Life, and AIG, in descending order — held their same rankings as in first quarter last year. But two of the top three reported declines from the same year-earlier period. Allianz reported sales of $2.3 billion, a modest decline, and New York Life reported sales of $1.7 billion, also a modest decline. AIG reported sales of $1.5 billion, a modest increase.

Five of the top 20 fixed annuity carriers reported sales of over $1 billion, compared to just four in first quarter last year. The five included Forethought Annuity, which was new to the fixed annuity top 20 list compared to first quarter last year. Yet this bulking-up of the billion-and-up group was not enough to offset the overall 8 percent decline in the quarter’s fixed annuity sales.

In terms of rankings, just three of the top 20 fixed annuity carriers held the same numeric rankings they held one year ago. These were the top three sellers. Three others were new to the list compared to one year ago. The remaining 14 changed rankings — possibly reflecting competitiveness coming from the FIA side of the fixed business, which, as noted, continued to increase sales.

By comparison, at year-end 2014, all but two carriers had shifted their fixed annuity rankings from the year before. In fact, the LIMRA SRI year-end 2014 numbers showed several big year-over-year swings in rankings, with some fixed carriers moving up or down by three, four or more positions compared to 2013. At that time, total fixed sales increased by 13 percent over 2013, much of it due to strong FIA sales.

But this is the beginning of another year, and market conditions clearly have changed.

InsuranceNewsNet Editor-at-Large Linda Koco, MBA, specializes in life insurance, annuities and income planning. Linda can be reached at [email protected].

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Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda can be reached at [email protected].