After several uneven quarters for annuity sales, insurers are reporting a strong first quarter in earnings calls.
Official sales statistics for the overall market are expected next week, but across several top annuity sellers a peek into their sales numbers augurs well.
Annuity sales got a shot in the arm from regulatory developments in the first quarter. The Department of Labor had postponed the full Jan.1 roll-out of its fiduciary rule until July 2019. Then, an appeals court on March 15 invalidated the rule.
The rule made it more difficult to sell VAs and indexed annuities, each of which represent multibillion-dollar sales categories, was blamed for the fall in annuity sales over the past few years. But the rule’s demise left insurance company executives cautiously optimistic and improved sentiment among distributors.
Barely a week after the Fifth Circuit Court of Appeals effectively killed the DOL rule, the Federal Reserve raised its short-term benchmark lending rate by a quarter point.
Rising rates make fixed annuities more attractive to retirement investors and rates have been climbing steadily since 2016 as the economy improves.
Fourth-quarter annuity sales already pointed to a market that had moved on from the dampening effects of the fiduciary rule, analysts said. But they will know for sure once they scrub through first-quarter sales data.
LIMRA Secure Retirement Institute will report first-quarter sales numbers next week, and Wink’s Sales & Market Report is expected to report by the end of the month.
If those numbers show an increase, that would be in step with the rest of the financial industry.
"We expected a strong first quarter earnings season and we got it," said John Lynch, chief investment strategist for LPL Financial. "Growth was very impressive with S&P 500 Index earnings growing 26 percent year over year, the best since the fourth quarter of 2010."
Tax reform, better economic growth, robust manufacturing activity and a weak U.S. dollar were among the factors contributing to a strong earnings season, he said.
Sales Message Consistent Across Insurers
Clues in earnings reports over the past two weeks point to a promising quarter for annuities as company executives mentioned encouraging sales momentum and adding product “shelf space” among distributors.
At American Equity, a top seller of indexed annuities, gross sales in the first quarter rose 2 percent to $1 billion over the fourth quarter, said Ronald J. Grensteiner, president of American Equity in West Des Moines. Sales of fixed index annuities rose 5.2 percent to $994 million over the fourth quarter, the company said. Sales by independent agents for American Equity rose 9.5 percent over the fourth quarter.
"We are pleased with another sequential increase in FIA sales and the momentum we have in sales by American Equity Life's independent agents,” said American Equity Chairman and CEO John Matovina. “Sales in that channel appear to have bottomed in the third quarter of last year."
Lincoln Financial in Radnor, Pa., reported sales of fixed and variable annuities rose 25 percent to $2.5 billion over the year-ago period.
Lincoln, a big seller of VAs, saw sales rise 40 percent compared to the year-ago quarter, the company reported.
Quarterly sales growth was broad-based with sales among all distribution channels up more than 20 percent and double-digit growth in “nearly every product category,” Lincoln President and CEO Dennis R. Glass said in a conference call.
Annuity sales should rise higher still as the year progresses with “another exciting distribution expansion discussion going on,” Glass said.
He declined to give details.
At Prudential Financial individual annuity sales rose 20 percent to $1.7 billion compared to the year-ago period, the company said.
Sales rose 7 percent compared to the fourth quarter, Newark, N.J.-based Prudential reported.
Brighthouse Financial, based in Charlotte, N.C., said sales of the company’s Shield buffered variable annuities along with the company’s fixed indexed annuities rose 35 percent to $1.3 billion over the year-ago quarter.
The company remains bullish on buffered VAs, said Myles Lambert, the company’s chief distribution and marketing officer.
Buffered VAs represent a fast-growing subsegment of the VA market.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected]
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