LIMRA’s Secure Retirement Institute recently released the retail annuity sales numbers from the first quarter of this year. LifeHealthPro’s Kristen Beckman summarized the findings in the article “Fixed annuities continue growth trend.” Fixed annuity sales were $32.3 billion, an increase of 48% from last year. Each different product in the fixed annuity market saw growth in the double digits. The increase in fixed annuity sales pushed total annuity sales to $58.9 billion, an increase of 9% from last year. It’s the third quarter in a row that total annuity sales increased. Variable annuity sales were $26.6 billion, a decrease of 18% from last year. It was the lowest total variable annuity sales since 2001, a decrease that wasn’t entirely unexpected. Out of the top 20 variable annuity sellers, 19 of them had sales losses during the first quarter.
There were two main reasons for the decline in variable annuity sales. The first was the impending DOL Fiduciary Rule that ended up adding BICE requirements and additional guidelines for VA sellers. In addition to that, equity markets declined significantly to start the year and remained volatile for awhile. The volatility not only hurt variable products, but also pushed more people to fixed and indexed annuities. Now that the DOL fiduciary rule is finalized, experts predict that variable annuity sales will decline between 15-20% this year and 25-30% in 2017. Variable annuity products only accounted for 45% of the market share during the first quarter, a market share that hasn’t been seen since the 1990’s. To put it in perspective; VAs accounted for 60% of the market share just last year.
Since the majority of people in the annuity industry were not expecting indexed annuity products to be included in the DOL’s BICE requirements, many manufacturers and advisors alike focused on these products during the first quarter. Indexed annuity sales were $15.7 billion, an increase of 35% from last year. This is the 8th straight quarter that indexed annuity sales went up. All of the top 10 fixed indexed annuity sellers saw their sales increase during the first quarter. LIMRA’s Institute forecasts increasing indexed annuity sales for the rest of the year, despite them being included in the DOL Fiduciary rule because it doesn’t take effect until 2017.
Some other annuity products had notable sales increases as well. Deferred fixed annuity sales increased by 90% during the first quarter, something that often happens when equity markets are volatile. Even though interest rates dropped, income annuity sales increased. Immediate income annuity sales went up 25% to $2.5 billion, while deferred income annuity sales increased 29% to $729 million. Twelve percent of DIA sales were from QLAC products. The number of companies selling these Qualified Longevity Annuity Contracts has increased to 11. These numbers are likely to increase even more as the year goes on. The consumer demand for guaranteed income is strong, as shown by increasing SPIA and DIA sales.
LIMRA’s Institute forecasts flat annuity sales for the entire year of 2016 and a decrease of 15-20% in annuity sales next year. They believe that fixed annuity sales will increase 15-20% this year, but will go down 5-10% next year after the DOL Fiduciary Rule takes effect. Total fixed annuity sales saw a strong first quarter, while variable annuity sales held their lowest market share since 1996.
Written by Rachel Summit