‘Game On’ for FIA Sales in Second Half of 2017

By Cyril Tuohy

The second-quarter sales rebound in fixed indexed annuities (FIA) and the delay of the Department of Labor’s fiduciary rule means we could see a sale frenzy during the last half of the year.

But will FIAs top last year’s $58 billion record?

“The DOL rule is on hold and my response to that is game on for FIA sales,” said Sheryl J. Moore, president and CEO of Moore Market Intelligence and Wink Inc., publisher of the life and annuity industry data tracker Wink’s Sales & Market Report.

“The last two quarters are likely to be much better than the first two,” she said. “Will it beat last year's sales? Probably not, but it will be close.”

Second-quarter FIA sales rebounded 13 percent to $14.6 billion compared with the first quarter, though FIA sales were still down nearly 6 percent when compared to the year-ago quarter, Wink reported last week.

Some insurers sweetened FIA features and that helped spur sales in the second quarter, but “we still have work to do to get FIAs back on track,” Moore said.

FIA gains in the second quarter over the first quarter this year outpaced the quarter-over-quarter sales increases in each of the preceding two years, wrote SunTrust Robinson Humphrey analyst Mark Hughes.

Overall, FIAs seem to be recovering in the wake of the first phase of the DOL rule taking effect June 9, he wrote in an Aug. 24 second-quarter sector update to clients.

But interest rate volatility may also be keeping cash on the sidelines waiting for higher future yields, Hughes wrote.

Uncertainly surrounding the fiduciary rule and a rising stock market has dampened the appeal of fixed annuities and other “safe money” products, Hughes wrote.

Some Uncertainty Swept Aside by Rule Delay

Some of the fog surrounding the DOL rule lifted this week with the publication of a tentative 18-month delay of phase two of the rule until July 1, 2019. The delay should be finalized sometime this fall, analysts say.

The delay is a win for the financial services industry, as the effective date of the most punitive measures in the rule is pushed back.

“It's going to be interesting to see what exactly happens given the more clarity and compliance as far annuities are concerned,” said Bill Shelow, president and CEO of LifeMark Partners, an independent marketing organization.

“There’s a chance that the numbers will bounce back,” he added.

In 2016, indexed annuity sales rose 10 percent to a record $58.2 billion compared with 2015, Wink reported.

Insurers and distributors are still adjusting systems and procedures to comply with key elements of the fiduciary rule, and of all the fixed annuity market segments, indexed products hold the most promise for a robust second half.

Without a doubt, FIAs were granted a major reprieve with the delay in the DOL rule and may yet surprise the industry with another record year in 2017.

Fixed annuity sales in the second quarter fell 7 percent to $29 billion compared with the year-ago period, LIMRA Secure Retirement Institute reported last week.

Fixed annuity sales fell 11 percent to $57 billion in the first half compared with the first half in 2016, LIMRA SRI reported.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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 [email protected].