It’s A Fixed Annuity World And Distributors Just Live In It

By John Hilton

BALTIMORE -- The annuity sales landscape changed in a major way in 2018. Sales rebounded strongly in virtually every product line, in some cases 40 to 50 percent year-over-year.

Fixed annuities led the way, said Todd Giesing, director, Annuity Research, LIMRA Secure Retirement Institute. It is a trend line that LIMRA researchers see continuing upward over at least the next five years.

Giesing and research analyst Teodor Panaitisor will present a session today on "The Five Ps of the Annuity Market" during day two of the 2019 Retirement Industry Conference. Those five Ps are "predict, plan, prepare, prevent ... and predict."

One prediction distributors can bank on is more fixed annuities, Giesing said: Sales could reach $180 billion by 2023. As recently as 2013, fixed annuity sales were $84 billion total.

"By 2023, we actually expect fixed annuity sales to encompass more than 60 percent of all annuities sold," he added. "That’s a stark difference from where we were just a few years back."

So what changed? Start with interest rates.

"Really since 2014 we haven’t had favorable interest rates at all," Giesing said. "Interest rates have been under 3 percent from a Treasury note perspective until this year. That’s made it

difficult for manufacturers to have the value proposition within their product lines."

Also, the regulatory shadow cast by the Department of Labor fiduciary rule was erased in 2018 when a federal appeals court tossed out the rule.

'The Key Theme'

A major shift in annuity sales motivation is toward accumulation and away from income. Both are important going forward, Giesing said.

"That’s the key theme that we expect to continue and that accumulation-focused sales will be the key driver," he explained. "They both have their value and they both have their place in the market itself, but don’t abandon your income-now or your income-later stories because we’re the only industry that can provide that."

While fixed indexed annuity sales will continue to rise, LIMRA sees a place for variable annuities as well -- just not a return to the glory days of VA sales in the mid-aughts.

During the product's peak, LIMRA recorded $184 billion in VA sales in 2007.

"We expect that VAs will continue to be a strong component of annuity sales," Giesing said. "Fixed annuities are here to stay and indexed annuities are here to stay. We still project variable annuities to be around $100 billion on an annual basis through 2023, so we don’t see them significantly eroding anymore, but we don’t see them growing significantly either."

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.