Annuity Sales Hit 15-Year Low In 3Q, LIMRA Reports

Windsor, Conn., Nov. 29, 2017 – Total U.S. annuity sales were $46.8 billion in the third quarter, down 13 percent from prior year, according to LIMRA Secure Retirement Institute’s Third Quarter 2017 U.S. Retail Annuity Sales Survey.

This is the first time quarterly annuity sales have fallen below the $50-billion mark in 15 years (2002) and marks the sixth consecutive quarter of decline in overall annuity sales.

“Despite strong economic indicators, both variable and fixed annuities fell short of last year’s sales results,” said Todd Giesing, director, Annuity Research, LIMRA Secure Retirement Institute.  “Looking closer at the third quarter sales decline, we are confident the initial implementation of the Department of Labor’s fiduciary rule on June 9^th had a negative effect on sales, particularly on IRA contracts.”

In the first nine months of 2017, overall annuity sales were $152.7 billion, down 11 percent from prior year. For seven straight quarters, fixed sales have outperformed variable annuity (VA) sales. The last time this happened was nearly 25 years ago.

The Institute predicts overall annuity sales to be around $200 billion at the end of 2017. “This has been a challenging year for the individual annuity market, but we expect the environment to improve in 2018,” Giesing noted.

Third quarter variable annuity (VA) sales were $21.8 billion, down 16 percent from prior year. This is the 15th consecutive quarter of declines and the lowest level of quarterly VA sales in 20 years.  Year-to-date, VA sales were $70.9 billion, 11 percent lower than the first nine months of 2016.

Declines were particularly prevalent in IRA contracts for VAs. IRA sales dropped 24 percent in the third quarter, a much steeper decline than the 3 percent dip non-qualified VA sales experienced.

Structured variable annuities sales also lost momentum in the third quarter, with sales declining 5 percent from the prior quarter. Sales were $1.7 billion, a 15 percent increase compared with the third quarter 2016. These accumulation-focused products represent 8 percent of the total VA market.

Fee-based VA product sales were $560 million in the third quarter, more than 50 percent higher than third quarter 2016, but a slight decline from the previous quarter.  Fee-based VA sales represent 2.5 percent of the total VA market.

LIMRA forecasts VA sales will drop 10-15 percent in 2017, falling below $100 billion. The last time VA sales were below $100 million was in 1998.

Fixed annuity sales were not immune to the impact of the initial implementation of the DOL fiduciary rule. Third quarter sales were $25 billion, down 11 percent compared with prior year.  Year-to-date, fixed sales also fell 11 percent to $81.8 billion.

Fixed indexed annuity (FIA) sales were $13.7 billion in the third quarter, a 9 percent decline compared with the third quarter 2016.

“A continued shift to accumulation focused-indexed products continues in the industry,” Giesing noted. “Sales of indexed annuities with a guaranteed living benefit (GLB) dropped significantly (27 percent) in the third quarter, compared with last year’s results; while sales without a GLB increased by 14 percent.”

In the first nine months of 2017, FIA sales were $42.9 billion, down 9 percent from prior year. The Institute is forecasting FIA sales to decline close to 10 percent in 2017, compared with 2016 sales results.

In the third quarter, sales of fee-based indexed annuity products were $48 million, representing less than half of one percent of the indexed market.

“With nearly 60 percent of the FIA market sold through independent agents, it is unlikely fee-based FIAs will experience significant growth unless regulations compel them,” Giesing commented.

Sales of fixed-rate deferred annuities (Book Value and MVA) fell 13 percent in the third quarter, to $7.4 billion. Year-to-date, fixed-rate deferred sales totaled $26.8 billion, down 14 percent from prior year.

Despite steady interest rates, SPIA sales fell 9 percent in the third quarter to $2 billion.  For the past several quarters, SPIA sales have stayed in the $2-$2.2 range. Year-to-date, SPIA sales dropped 14 percent, totaling $6.2 billion.

Deferred income annuity (DIA) sales dropped 14 percent to $520 million. In the first three quarters of 2017, DIA sales totaled $1.67 billion, down 25 percent from prior year.

Third quarter 2017 Annuities Industry Estimates are located in LIMRA’s Data Bank. Also available are:

• Variable, fixed and total annuity sales over the past 10 years: Annuity Sales 2007-2016.
• Top twenty rankings of total, variable and fixed annuity writers for third quarter 2017: Third Quarter 2017 Total, VA and Fixed Annuity Rankings.
• Top twenty rankings of only fixed annuity writers for third quarter 2017: Third Quarter 2017 Fixed Breakout Annuity Rankings.

LIMRA Secure Retirement Institute's Third Quarter U.S. Individual Annuities Sales Survey represents data from 96 percent of the market.