BALTIMORE -- The
annuity sales landscape changed in a major way in 2018. Sales rebounded
strongly in virtually every product line, in some cases 40 to 50 percent
year-over-year.
Fixed annuities led
the way, said Todd Giesing, director, Annuity Research, LIMRA Secure Retirement
Institute. It is a trend line that LIMRA researchers see continuing upward over
at least the next five years.
Giesing and
research analyst Teodor Panaitisor will present a session today on "The
Five Ps of the Annuity Market" during day two of the 2019 Retirement
Industry Conference. Those five Ps are "predict, plan, prepare, prevent
... and predict."
One prediction
distributors can bank on is more fixed annuities, Giesing said: Sales could
reach $180 billion by 2023. As recently as 2013, fixed annuity sales were $84
billion total.
"By 2023, we
actually expect fixed annuity sales to encompass more than 60 percent of all
annuities sold," he added. "That’s a stark difference from where we
were just a few years back."
So what changed?
Start with interest rates.
"Really since
2014 we haven’t had favorable interest rates at all," Giesing said.
"Interest rates have been under 3 percent from a Treasury note perspective
until this year. That’s made it
difficult for
manufacturers to have the value proposition within their product lines."
Also, the
regulatory shadow cast by the Department of Labor fiduciary rule was erased in
2018 when a federal appeals court tossed out the rule.
'The Key Theme'
A major shift in
annuity sales motivation is toward accumulation and away from income. Both are
important going forward, Giesing said.
"That’s the
key theme that we expect to continue and that accumulation-focused sales will
be the key driver," he explained. "They both have their value and
they both have their place in the market itself, but don’t abandon your
income-now or your income-later stories because we’re the only industry that
can provide that."
While fixed indexed
annuity sales will continue to rise, LIMRA sees a place for variable annuities
as well -- just not a return to the glory days of VA sales in the mid-aughts.
During the
product's peak, LIMRA recorded $184 billion in VA sales in 2007.
"We expect
that VAs will continue to be a strong component of annuity sales," Giesing
said. "Fixed annuities are here to stay and indexed annuities are here to
stay. We still project variable annuities to be around $100 billion on an annual
basis through 2023, so we don’t see them significantly eroding anymore, but we
don’t see them growing significantly either."
InsuranceNewsNet
Senior Editor John Hilton has covered business and other beats in more than 20
years of daily journalism. John may be reached at john.hilton@innfeedback.com.
Follow him on Twitter @INNJohnH.
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