Fixed Indexed Annuity Products Are Rising Above

Fixed indexed annuity sales are strong and will continue to grow this year, according to LifeHealthPro’s Peggy Bresnick. In “U.S. fixed indexed annuity sales on growth course,” Bresnick said that indexed annuity sales are strong and steady despite an overall annuity sales slowdown. Total annuity sales were down almost 7% in the first quarter of this year, based on research from the Insured Retirement Institute. Fixed annuity sales decreased 9.5% from the fourth quarter of 2014 to the first quarter of 2015. But that has a lot to do with the fact that five year record highs were set in 2014. Fixed annuity sales are still around 40% higher than they were two years ago.

The star in the annuity industry continues to be fixed indexed annuities. First quarter sales were $11.6 billion, which was 3% higher than during the first quarter of 2014. Fixed indexed annuities now make up 55.6% percent of total fixed annuity sales now, which is record breaking.

The IRI’s President and CEO, Cathy Weatherford, said that lower first quarter annuity sales were likely a direct result of the sharp decline in interest rates during January of this year. Financial experts believe that interest rates will increase this year, although they haven’t gone up quite as much as was anticipated just yet. She says that many people probably held out from purchasing annuities early in the year because of the forecasted interest rate increase. The IRI expects that those holding off will buy annuities later this year and increase the sales figures significantly. Retirement savers are still seeking guaranteed lifetime income* and that will continue leading them to annuity products.

When it comes to variable annuity products, their first quarter net sales were negative because of product redemption. Qualified variable annuity sales were $21.1 billion in the first quarter and non-qualified sales were $10.7 billion. Morningstar’s Senior Product Manager of Annuity Products said that variable annuity assets under management have been steadily growing because of strong investment performance. Variable annuities are seeing new sales, but at a slower rate than last year. Consumers are also showing less risk aversion than they were and choosing more aggressive variable annuity investment options.

The end of 2015 is likely to be good for the annuity industry, especially when it comes to fixed indexed annuity products. If you have any questions about annuity products, contact an expert at Annuity FYI.

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*Guarantees of annuities rely on the financial strength and claims-paying ability of the insurance company that issues them. Lifetime payouts may be a benefit of the base annuity contract, or may be offered through the additional purchase of a lifetime benefit rider.

1. Bresnick, Peggy. “U.S. fixed indexed annuity sales on growth course.” LifeHealthPro, August 17, 2015.

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