FIAs Smash Sales Record For Second Straight Quarter

Fixed indexed annuity sales were $18 billion, 38 percent higher than third quarter 2017 and 2 percent higher than second-quarter sales results, according to LIMRA Secure Retirement Institute (LIMRA SRI) Third Quarter 2018 Sales Survey.

Year-to-date, FIA sales were $50.1 billion, 22 percent higher than the first three quarters of 2017. The survey represents 95 percent of the market, LIMRA said.

“The entire annuity market benefited from strong growth in interest rates. Over the past year, the 10-year Treasury rate has increased nearly 60 basis points and ended the third quarter above the 3 percent mark,” said Todd Giesing, annuity research director, LIMRA SRI. “Unlike prior quarters when accumulation products drove the growth, FIA products with guaranteed lifetime benefit riders showed the most growth in the third quarter. In a higher-interest rate environment, companies are able to increase their guaranteed lifetime withdrawals rates, making these products more attractive to consumers looking to create guaranteed income in retirement.”

LIMRA SRI forecasts total 2018 FIA sales to be in $70 billion range, exceeding expectations and easily breaking current annual sales records. Slower growth is expected in 2019 and 2020.

Variable annuity sales increased 25 percent in the third quarter to $25.0 billion, compared with prior year results. In the first nine months of 2018, VA sales were $75.4 billion, up 4 percent, compared with the same period in 2017.

“One of the factors driving VA sales growth is the increase in registered indexed-linked annuity (RILA) sales, which were nearly $3 billion in the third quarter,” Giesing said. “With more companies signaling their intention to enter the market, LIMRA SRI expects this market to top $10 billion by the end of 2018. Greater volatility in equity markets and better pricing due to rising interest rates are attracting consumers looking for a blend of growth and downside protection.”

Third-quarter RILA sales grew 27 percent to $2.98 billion, representing 12 percent of the VA market. Year-to-date, RILA were $7.68 billion, 13 percent higher compared with prior year.
While fee-based VAs increased 43 percent over prior year to $800 million, this is down 6 percent, compared with second quarter results.

“There continues to be operational hurdles in the fee-based VA market, which challenge adoption of these products by certain distribution channels. We expect companies will work to resolve these in the next few years," Giesing said.

LIMRA SRI is forecasting VA sales to increase less than 5 percent in 2018, which would represent the first annual growth for VA sales in six years. VA sales are expected to slightly dip in 2019 in anticipation of equity market declines.

Fixed annuity sales drove most of this quarter’s growth. Fixed annuity sales have outperformed variable annuity (VA) sales in nine of the last 11 quarters. Total fixed annuity sales were $33.8 billion in the third quarter, a 39 percent increase compared with third quarter 2017 results. Year-to-date, total fixed annuity sales were $94.6 billion, up 18 percent from prior year.

LIMRA SRI expects total fixed annuity sales to hit record levels in 2018, with fixed annuities expected to end 2018 around $130 billion, the fourth consecutive year exceeding $100 billion. This has never occurred in the 40+ years LIMRA SRI has been tracking annuity sales.

Fixed-rate deferred (FRD) annuity sales jumped 51 percent in the third quarter to $11.2 billion. Year-to-date, fixed rate deferred sales $31.3 billion, 17 percent higher than prior year.
LIMRA SRI expect this strong growth in the FRD market to continue into the fourth quarter.

There is a significant amount of FRD contracts out of their surrender charge period, which could find more attractive rates in the rising interest rate environment. LIMRA SRI is forecasting 2018 sales to grow as much as 20 percent and as much as 25 percent in 2019.

Fixed immediate annuity sales were up 20 percent in the third quarter to $2.4 billion. Year-to-date, fixed immediate annuity sales were $7.0 billion, 13 percent higher than prior year.

Deferred income annuity (DIA) sales rose 6 percent in the quarter, to $550 million. Year-to-date, DIA sales were $1.64 billion, down 2 percent from the same period in 2017.

LIMRA SRI is forecasting income annuity growth of 5-10 percent in 2018 and as much as 5 percent in 2019.

Total annuity sales were $58.8 billion, 25 percent above the third quarter 2017 results. For the first three quarters of 2018, total annuity sales were $170 billion, which is 11 percent higher than prior year. LIMRA SRI expects 2018 individual annuity sales will be north of $230 billion exceeding expectations.