LIMRA: Banks Rebound In 3Q To Drive Fixed-Rate Deferred Annuities Growth

Fixed-rate deferred (FRD) annuity sales surged 60% in the third quarter to $15.8 billion, driven in part by strong sales through banks, according to the Secure Retirement Institute(R) (SRI(R)) U.S. Individual Annuity Sales Survey.

"Despite the 10-year treasury rates remaining below 1%, FRD annuities were the largest driver of sales growth in the third quarter. With $6.54 billion in fixed-rate deferred sales in the third quarter -- nearly $3 billion higher that the second quarter -- bank sales represented over 41% of all FRD annuity sales in the third quarter, an increase of 73% from the prior quarter and 85% year-over-year," noted Todd Giesing, senior annuity research director, SRI. "Because bank branches were closed during the early stages of the pandemic, annuity sales dropped significantly earlier in the year. As the U.S. slowly opened up in the second and third quarters and investors sought out protection products, bank sales rebounded."

Year-to-date, FRD annuity sales were $15.8 billion, up 1% from prior year. FRD annuities were the only fixed annuity products to experience positive growth in the first nine months of 2020.

Fixed indexed annuity (FIA) sales also rebounded from the second quarter. FIA sales were $13.2 billion, up 10% from the second quarter yet remained 29% below prior year. All channels except the independent agent channel experienced double-digit growth, compared with second quarter results.

"Traditionally a large portion of independent agents' business has been focused on products with guaranteed living benefits, which are not as attractive in this economic environment and likely contributed to the 2% decline in FIA sales for independent agents (compared with second quarter results)," said Giesing. "In addition, the impact of social distancing may have had a larger impact on independent agents because they likely don't have the same level of resources and support as agents working at large broker dealers and banks."

In the first three quarters of 2020, FIA sales were $41.4 billion, 27% lower than prior year results.

Income annuities continue to struggle in 2020 as record-low interest rates undermine the value propositions for these products. SRI is forecasting income annuities to fall more than a third in 2020.

Single-premium income annuity (SPIA) sales were $1.4 billion in the third quarter, down 39% from third quarter 2019. Year-to-date, SPIA sales $4.7 billion, 40% lower than the first nine months of 2019. Deferred income annuity (DIA) sales were $419 million in the third quarter, falling 29% from prior year. DIA sales were $1.2 billion year-to-date, 36% lower than the first three quarters of 2019.

Total fixed annuity sales were $31.8 billion. This is just 3% lower than third quarter 2019. In the first nine months of 2020, total fixed annuity sales were $89.4 billion, 18% below prior year.

Total variable annuity (VA) sales fell 11% in the third quarter to $23.5 billion, compared with third quarter 2019. However, VA sales were 13% higher than second quarter as bank and full-service national broker-dealers recorded more than 25% growth. VA sales were $70.3 billion in the first nine months of 2020, down 6% from the first three quarters of 2019. SRI is forecasting VA sales to remain steady in the fourth quarter and to reach $89-$94 billion by the end of 2020.

Registered index-linked annuity (RILA) sales leapt 29% to $6.3 billion, 38% higher than second quarter sales.

"Economic conditions are very favorable for RILA products, providing investors downside protection with greater growth potential," Giesing said. "The majority of the RILA sales growth was in accumulation-focused products. All distribution channels experienced growth of 30% or higher from the prior quarter."

Year-to-date, RILA sales were $15.7 billion, up 25% from 2019 results.

Total annuity sales were $55.3 billion in the third quarter, up 14% from the second quarter but 7% lower than prior year. Year-to-date, annuity sales totaled $159.7 billion, falling 13% from prior year.

Third quarter 2020 annuities industry estimates represent 95% of the total market. A summary of the results can be found in LIMRA's Fact Tank.

SRI has expanded its reporting to include the top traditional VA and RILA sales leaders. Please visit Third Quarter 2020 YTD Variable Annuity Rankings.

To view the top 20 rankings of total, variable and fixed annuity writers for the third quarter 2020, please visit Third Quarter 2020 YTD Annuity Rankings.