Fixed indexed annuity sales had the second strongest first-quarter in 10 years as they were revived by the nearly dead Department of Labor fiduciary rule, according to LIMRA.
The strong overall market results confirmed what insurance company executives were saying in their earnings calls. First quarter FIA sales were up 11 percent to $14.5 billion, compared with first quarter 2017 and up 4 percent since last quarter, according to the LIMRA Secure Retirement Institute.
First-quarter sales usually dip from the fourth quarter. So the better-than-expected boost portends a good year.
“Due to the DOL fiduciary rule being vacated in April 2018 and the expectation for positive economic factors, we have revised our 2018 annuity forecast and now expect a 5-10 percent increase in annuity sales growth,” said Todd Giesing, annuity research director.
But the fiduciary rule’s diminishment by the DOL and near defeat by a federal court do not take all the credit.
“This uptick in sales is a combination of an improved outlook on a regulatory front, as well as rising interest rates creating the opportunity for more attractive rates,” Giesing said.
But the rest of the annuity market was not as strong, leading to a level quarter. Overall, annuity sales were $51.8 billion – about even with first quarter 2017 results.
Fixed Annuity Sales Kind Of Fixed
Total fixed annuities remained flat in the first quarter, totaling $27.2 billion. Fixed annuities have outperformed VA sales seven out of the last eight quarters. LIMRA SRI expects overall fixed annuity sales to increase 10-15 percent in 2018.
Sales of fixed-rate deferred annuities, (Book Value and MVA) fell 14 percent in the first quarter to $8.7 billion. After multiple quarters deviating from the 10-year treasury rate, this quarter the sales aligned with the treasury rate growth. LIMRA SRI predicts fixed-rate deferred sales will increase 15-20 percent in 2018.
First-quarter single-premium immediate annuity (SPIA) sales were up 5 percent in the first quarter to $2.1 billion, when compared to the same quarter last year. SPIA sales have remained relatively stagnant in the $2 billion to $2.2 billion range for the past two years.
Deferred income annuity sales fell 6 percent in the first quarter 2018 to $515 million. This is the lowest DIA sales have been since the first quarter 2013.
Overall, increasing interest rates and other economic factors leads LIMRA SRI to project total income (SPIA and DIA) annuity sales to grow 5-10 percent in 2018.
Variable Annuities Hanging In There
Variable annuity sales totaled $24.6 billion, down 1 percent from the prior year. This marks the 17th consecutive quarter of declines for VA sales.
“While this quarter wasn’t strong for VAs, we are seeing some companies introduce new products, raise crediting rates for guaranteed living benefit products and loosen restrictions on investments, Giesing said. “Combined with the vacated Department of Labor fiduciary rule, we expect VA sales will improve throughout the year. As a result, LIMRA SRI is forecasting VA sales to be 0-5 percent higher in 2018, compared with 2017 results.”
Fee-based VA sales increased 70 percent to $780 million in the first quarter, but still represent just 3 percent of the total VA market.
Companies have been introducing new annuities that are marketed as buffered and index-linked. Some don’t even have subaccounts as with typical variable annuities.
To fit the products into a category, LIMRA is renaming structured VAs as “registered indexed-linked annuities” and will be included in the overall VA sales figures.
Registered index-linked annuity sales were $2.2 billion, an increase of 4 percent in the first quarter, compared with prior year. Sales declined 6 percent when compared to the prior quarter. These products represent about 9 percent of the retail VA market.