Structured VA Sales Rise 36 Percent in 2Q

Structured variable annuity sales in the second quarter rose 36 percent to $1.8 billion compared with the year-ago period.

The product subcategory now accounts for 7 percent of the variable annuity market, a market expert said.

“You have subsets of products doing well out there,” said Todd Giesing, director, Annuity Research, with LIMRA Secure Retirement Institute. “The structured ones are doing very well and a few companies are driving growth.”

Allianz Life, Axa and Brighthouse Financial are the biggest sellers in the structured variable annuity subsegment.

Advisors can expect more companies to jump into this rare bright spot in the variable annuity market, experts said.

Structured annuities, also known as buffered or hybrid variable annuities, protect, or buffer, contract holders from market downturns to a limited extent.

About 80 percent of structured variable annuities are sold through independent broker-dealers and banks.

Advisors are drawn to these structured capital accumulation products – a cross between a traditional variable annuity and a fixed indexed annuity – because they come with fewer investment restrictions.

Structured variable annuities eschew the higher fees necessary to pay for the living benefits and insurers don’t have to hedge against them.

Sales into Nonqualified Accounts Rise

Second-quarter variable annuity sales data also unearthed the bifurcation between variable annuities sold into individual retirement accounts (IRA) and variable annuities sold into nonqualified accounts.

“We’re seeing qualified variable annuities move in a different direction than nonqualified, likely the result of the Department of Labor (DOL) fiduciary rule,” Giesing said.

Qualified variable annuity sales dropped 16 percent to $11.5 billion compared with last year.

Variable annuity sales into IRAs account for 58 percent of retail variable annuity sales, a 5 percent drop from last year, LIMRA SRI reported.

Sales of variable annuities into nonqualified accounts rose 5 percent to $8.4 billion compared with last year.

Variable annuity sales into nonqualified accounts now make up 42 percent of retail variable annuity sales, Giesing said.

The DOL fiduciary rule has affected the mix of sales of variable annuities that come with guaranteed/nonguaranteed living benefits into nonqualified accounts, Giesing said.

Sales of variable annuities with guaranteed living benefits run nearly equal with variable annuity sales without living benefits, Giesing said.

As recently as five years ago, over 80 percent of variable annuities were sold with a living benefit rider.

Overall Market Contraction Continues

In the second quarter, U.S. variable annuity sales shrank 8 percent to $24.7 billion compared with the year-ago period, LIMRA SRI reported last week.

Overall variable annuity sales have declined every quarter for 14 consecutive quarters.

Sales in the first half dropped 8 percent to $49.1 billion compared with the year-ago period reported. Sales of fixed and variable annuities are at their lowest in 16 years, LIMRA SRI reported.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at cyril.tuohy@innfeedback.com.

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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 cyril.tuohy@innfeedback.com.