VA Sales Slide Ends; Full Rebound Unlikely, Analysts Say

By Cyril Tuohy

At long last the slide in VA sales has come to a halt.

After 17 consecutive quarters of declines, second-quarter sales of VAs rose – if ever so slightly – 2 percent to $25.8 billion compared with the year-ago period, LIMRA Secure Retirement Institute reported.

Sales rose 3.6 percent compared with the first quarter. VA sales were $50.4 billion in the first half, level with the year-ago period, LIMRA SRI reported.

“It’s nice to see that the quarterly values have stopped that long slide, but growth is minimal,” said Todd Giesing, annuity research director for LIMRA SRI.

The top-three sellers were Jackson, TIAA and AXA, LIMRA reported.

For a long-suffering segment of the annuity market, two major developments helped stem the ebbing VA tide.

In March, a federal count vacated the Department of Labor’s fiduciary rule and the Trump administration opted not to appeal the decision, effectively killing a rule that many VA sellers blamed for contributing to the decline in sales.

Rising interest rates also help make the living benefit features on VAs more attractive and companies have loosened investment restrictions, which gives advisors more freedom in their investment choices, Giesing said.

'Not Having The Same Success'

But VAs still face an uphill battle as insurance companies add competitive features to index products and rising Treasury yields make fixed annuities more attractive.

“Despite introducing 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,” Giesing said.

“In the VA market, we've had the regulatory issues and concerns that have diminished and we have better economic conditions that should help,” he said. “But we've also seen a shift and the pivot to index annuities and they are growing much faster than VA side.”

Index annuities and multi-year guaranteed annuities, or MYGAs, each posted double-digit percentage sales gains, LIMRA reported

Sub-segments of the VA market, like fee-based VAs and registered indexed-linked annuities (RILAs), have done well as sales continued to climb -- albeit from a very small base.

Second-quarter sales of fee-based VAs, which are designed to appeal to registered investment advisors, rose 49 percent to $850 million, LIMRA reported.

Fee-based VAs, however, represent only 3.3 percent of the total VA market.

Insurers and distributors are still adjusting their technology platforms to accept fee-based products, so there’s still plenty of growth potential for those VAs.

Fee-based VAs should eventually break the $1 billion per-quarter sales threshold, Giesing said.

Overall second-quarter annuity sales rose 10 percent to $59.5 billion, over the year-ago period, LIMRA SRI reported.

Fixed annuity sales rose 9 percent to $33.7 billion in the second quarter over the year-ago period.

RILA Sales Growth Slowing

Sales of RILAs, which are sold predominantly via banks and broker-dealers, rose 6 percent to $2.5 billion from the year-ago period, LIMRA reported.

RILAs, which are referred to as structured annuities, tend to be sold without guaranteed living benefits.

They are on track to sell about $10 billion this year, up from $9.2 billion last year, but sales appear to be slowing as other products become more attractive.

VA sales this year are expected to rise less than 5 percent over last year, according to LIMRA forecasts. Last year, VA sales fell 9 percent to $96 billion compared to 2016.

The days when VAs sold $30 billion or $40 billion a quarter are gone, “but we think VA sales will be level over the next three years at $100 billion a year to 2020,” Giesing said.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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 [email protected].