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Indexed Annuity Sales Soar in 2018

LIMRA has reported near-record fixed indexed annuity sales numbers, marking the sector’s second strongest first-quarter showing in 10 years. According to a recent InsuranceNewsNet article, FIA sales were up 11% to $14.5 billion, and many industry experts are crediting the Department of Labor fiduciary rule for the revival. First-quarter sales typically dip from the fourth quarter, and the unexpected boost has many believing the year will continue to improve.

“Due to the DOL fiduciary rule being vacated in April 2018 and the expectation for positive economic factors, we have revised our 2018 annuity forecast and now expect a 5-10% increase in annuity sales growth,” said Todd Giesing, annuity research director. “The uptick in sales is a combination of an improved outlook on a regulatory front, as well as rising interest rates creating the opportunity for more attractive rates,” he added.

The rest of the annuity market did not perform quite as well. Overall, annuity sales were $51.8 billion, which is about even with first quarter numbers from 2017.

While fixed annuities have outperformed variable annuity sales in seven of the last eight quarters, total fixed annuity sales have remained flat in the first quarter, only totaling $27.2 billion. Still, LIMRA SRI expects overall fixed annuity sales to increase 10-15% in 2018.

Sales of fixed-rate deferred annuities dropped 14% in the first quarter to $8.7 billion, however LIMRA SRI still predicts sales of these products to increase 15-20% in 2018.  

Sales of single-premium immediate annuity (SPIA) in the first-quarter improved 5% to $2.1 billion when compared to the same quarter in 2017. SPIA sales have remained fairly steady in the $2 billion to $2.2 billion range for the last two years.

Deferred income annuity sales dropped 6% in the first quarter to $515 million, which is the lowest DIA sales have been since 2013. Increasing interest rates and other economic factors have LIMRA SRI projecting a growth of 5-10% in total income from SPIA and DIA annuity sales in 2018.  

Meanwhile, variable annuity sales are down 1% from the previous year, marking the 17th consecutive quarter of declines.

“While this quarter wasn’t strong for VAs, we are seeing some companies introduce new products, raise crediting rates for guaranteed living benefit products and loosen restrictions on investments,” Geising stated. “Combined with the vacated Department of Labor fiduciary rule, we expect VA sales will improve throughout the year. As a result, LIMRA SRI is forecasting VA sales to be 0-5% higher in 2018, compared with 2017 results.”

Fee-based variable annuity sales increased 70% to $780 million in the first quarter, but only represent about 3% of the total VA market.

New annuity products, marketed as buffered and index-linked, are still being introduced by several companies, although some don’t have sub accounts as is typical with variable annuities. In order to fit the products into a category, LIMRA is renaming structured VAs as “registered indexed-linked annuities,” and including them in the overall VA sales figures. Registered index-linked annuity sales were $2.2 billion, up 4% in the first quarter when compared with last year, but when compared to the prior quarter, they actually dropped 6%. These products only represent about 9% of the retail variable annuity market.

Written by Rachel Summit

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