Total Annuity Sales Rocket Up 10 Percent In 2Q

Fixed indexed annuity (FIA) sales were $17.6 billion, 17 percent higher than second quarter 2016 and 21 percent higher than first quarter sales results, according to LIMRA Secure Retirement Institute Second Quarter 2018 Sales Survey.

“This quarter’s FIA sales topped the record set in the fourth quarter 2015 by 12 percent,” said Todd Giesing, annuity research director, LIMRA Secure Retirement Institute. “Growth was wide-spread with all of the top 10 manufacturers reporting double-digit growth from the first quarter 2018. Clearly, with the Department of Labor’s (DOL) fiduciary rule vacated and the prospect of continued rising interest rates, demand for this product is high.”

In the first half of 2018, FIA sales were 32.1 billion, 14 percent higher than the first half of 2017.

Fee-based FIA sales were $67 million in the second quarter. Fee-based FIAs represent than one-half of one percent of the total FIA market.

LIMRA SRI is forecasting FIA sales to grow 5-10 percent in 2018 - exceeded the prior annual record of $59.1 billion - and we expect FIA sales to continue to show growth in 2019 and 2020.

Total annuity sales were $59.5 billion, a 10 percent above the second quarter 2017 results and 15 percent higher than the first quarter. The last time sales were at this level was in the first quarter of 2015.

Fixed annuity sales drove most of this quarter’s growth, which have outperformed variable annuity (VA) sales in eight of the last 10 quarters.

Year-to-date, total annuity sales were $111.3 billion, 5 percent higher than sales results from the first half of 2017. LIMRA SRI expects a 5-10 percent increase for annuity sales this year and 0-5 percent growth in 2019.

After 17 consecutive quarters of declines, VA sales improved 2 percent to $25.8 billion in the second quarter. VA sales were $50.4 billion in the first two quarters of 2018, level with prior year results.

“Despite introducing of new products and making changes to enhance their existing products to make them more competitive, companies are not having the same success with VAs as they are with fixed annuities,” noted Giesing. “However, the new and enhanced VAs, combined with the vacated DOL rule and better economic conditions, have led to slightly improved sales.”

Fee-based VAs sales were $850 million in the second quarter. While this is a 49 percent increase over second quarter 2017, fee-based products still only represent 3.3 percent of the total VA market.

In the second quarter, registered indexed-linked annuity sales increased 6 percent from prior year to $2.5 billion. With rising interest rates, sales growth has slowed as other product options have become more attractive. Currently these products represent 10 percent of the retail VA market.

LIMRA SRI predicts total VA sales to increase less than 5 percent in 2018.

Total fixed annuity sales were $33.7 billion in the second quarter, improving 18 percent compared with the second quarter 2017 results. Year-to-date, total fixed annuity sales were $60.9 billion, 9 percent higher than the first half of 2017.

Sales of fixed-rate deferred annuities (Book Value and MVA) benefited from the higher interest rates, up 23 percent in the second quarter to $11.4 billion. Quarterly sales have not been this high since the first quarter 2016.

Year-to-date, fixed rate deferred annuity sales were $20.1 billion, 4 percent higher than the same period of 2017.

“We believe fixed-rate deferred sales will have a strong second half of the year, based on the prospect of continued interest rate increases,” Giesing said. LIMRA SRI predicts fixed-rate deferred annuity sales to increase 15-20 percent this year and as much as 25 percent in 2019.

Immediate income annuity sales jumped 14 percent in the second quarter to $2.5 billion. This represents the highest quarterly sales in two years. In the first half of 2018, immediate income annuity sales were $4.6 billion, 10 percent higher than prior year.

The only annuity product that did not see positive sales growth was deferred income annuities (DIA). DIA sales dropped 4 percent in the second quarter, to $575 million. DIA sales were $1.1 billion in the first half of 2018, down 5 percent from prior year.

“Rising interest rates will benefit income annuity sales. LIMRA SRI is forecasting 5-10 percent growth in 2018, said Giesing. “These products offer a unique value for retirees and pre-retirees seeking protected accumulation and guaranteed lifetime income features.”

Second quarter 2018 Annuities Industry Estimates and the ten-year annuity sales trends are located in LIMRA’s Data Bank.

LIMRA Secure Retirement Institute's Second Quarter U.S. Individual Annuities Sales Survey represents data from 95 percent of the market.