By Staff Reports
August 21, 2019
Fixed indexed
annuity (FIA) sales were $20 billion in the second quarter, 14% higher than
prior year results, according to the LIMRA Secure Retirement Institute.
In fact, annuity
sales were up sharply again across the board, continuing a sales rebound that
began with the defeat of the Department of Labor fiduciary rule early in 2018.
“This quarter’s FIA
sales total represents the highest quarterly sales for FIAs ever,” noted Todd
Giesing, annuity research director, LIMRA SRI. “Despite declining interest
rates, we are forecasting the current momentum of FIA sales to continue through
the end of the year and expect sales of FIAs to exceed $70 billion for 2019.”
In the first six
months of 2019, FIA sales were $38 billion, an increase of 18%, compared with
the first six months of 2018.
Likewise, Wink’s
Sales & Market Report recorded a number of positive sales trends apart from
FIAs:
• Indexed annuity
sales increased by 11% over the prior quarter and by nearly 14% over the same
period last year. Indexed annuities have a floor of no less than zero percent
and limited excess interest that is determined by the performance of an
external index, such as Standard and Poor’s 500.
• Traditional fixed
annuity sales declined by nearly 10% over the prior quarter and rose more than
21% over the same period last year. Traditional fixed annuities have a fixed
rate that is guaranteed for one year only.
• Multi-year
guaranteed annuity (MYGA) sales increased by 15% over the prior quarter and
were up nearly 20% over the same period last year. MYGAs have a fixed rate that
is guaranteed for more than one year.
• Structured
annuity sales declined by 15% over the prior quarter and were up nearly 20%
over the same period last year. Structured annuities have a limited negative
floor and limited excess interest that is determined by the performance of an
external index or subaccount.
• Variable annuity
sales increased nearly 17% over the prior quarter. Given that this is the
second quarter that Wink has collected data on sales of variable annuities,
additional comparisons will be available in future quarters. Variable annuities
have no floor, and potential for gains/losses that is determined by the
performance of the subaccounts that may be invested in an external index,
stocks, bonds, commodities, or other investments.
“Indexed annuity
sales in the second quarter had a record quarter, beating their previous record
in 4Q 2018 by nearly 3%” said Sheryl J. Moore, author of Wink’s Sales &
Market Report. “However, variable annuity sales and structured annuity sales’
increased nearly 20% each. It is a great time to be offering annuities with
growth based on an outside benchmark."
Fee-Based
Sales
Fee-based FIA sales
were $193 million in the second quarter, LIMRA reported. While this marks major
growth for this market (188% over prior year), fee-based FIAs hold less than 1%
of the total FIA market.
Total annuity sales
were $63.9 billion in the second quarter, up 7% compared with the prior year
results. This is the highest quarterly sales recorded since the first quarter
2009, and the third consecutive quarter where total annuity sales surpassed $60
billion.
Year to date, total
annuity sales were $124.8 billion, an increase 11%, compared with results from
the first half of 2018. Fixed annuities represented 60% of the total annuity
market in the second quarter. Fixed annuity sales have outperformed VAs sales
in 12 of the last 14 quarters.
After two
consecutive quarters of declines, LIMRA recorded VA sales at $25.8 billion,
level with second quarter 2018 results. For the first six months of the year,
VA sales were $48.6 billion, down 4%, compared with prior year results.
Traditionally, the
second quarter is when VA sales are the strongest. LIMRA SRI expects increasing
market volatility and falling interest rates will dampen VA sales for the
remainder of the year. LIMRA SRI is forecasting total VA sales to be under $100
billion for 2019.
Fee-based VA sales
were $725 million in the second quarter. While this is down 15% from prior
year, it is 10% higher than first quarter 2019 results. Fee-based VA sales
represented 2.8% of the total VA market in the second quarter.
In the second
quarter, registered index-linked annuity (RILA) sales were $4.14 billion, up
66% from prior year results. Year to date, RILA sales were $7.7 billion, 63%
higher than results from the first half of 2018.
“While RILA sales
have been driving overall VA sales growth recently – representing 16% of the
total VA market – after two consecutive quarters in the $3.5 billion range,
sales vaulted up,” Giesing said. “Heightened equity market volatility and the
fact that major distributors have RILA products on the shelves helped RILA
sales break through this plateau.”
Deferred
Annuity Sales Bump
Despite the
considerable decline in interest rates this quarter, fixed-rate deferred
annuity sales rose 10% in the second quarter to $13.1 billion. In the first six
months of 2019, fixed-rate deferred annuity sales totaled $28.2 billion, 35%
higher than prior year results.
“The 10-year
treasury rate dropped nearly 50 basis points from the start of the second
quarter,” said Giesing. “While we didn’t see significant impact on the
fixed-rate deferred annuity market during the second quarter, there is usually
a lag between in interest rates drops and sales declines. We anticipate sales
to substantially drop in the third and fourth quarters.”
Single-premium
immediate annuities (SPIA) sales totaled $2.7 billion, up 8% from prior year.
Year to date, SPIA sales were $5.5 billion, 20% higher than prior year.
“Traditionally,
SPIA sales are strongly linked to interest rates. However, we see another
dynamic coming into play,” Giesing remarked. “Over the past year, a growing
portion of the assets invested in SPIAs are qualified assets. This is likely
due to the rise in the number of individuals who are reaching the age for
taking required minimum distributions, and choosing to convert a portion of
their qualified assets into guaranteed income.”
Deferred income
annuities (DIA) sales grew 26% in the second quarter, to $727 million. In the
first six months of the year, DIA sales totaled $1.4 billion, 25% higher than
prior year.
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