First quarter 2019 annuity sales figures were recently released with fixed and variable annuity sales hitting $57.8 billion combined. According to an InsuranceNewsNet article, this is a 3.6% drop when compared to the fourth quarter of 2018, but still a whopping 17.5% above levels from a year ago.
Fixed annuity sales reached $37 billion in the first quarter, only a slight decrease from the fourth-quarter 2018 sales of $37.1 billion. The small drop pales in comparison to the year-to-year sales figures. In the first-quarter of 2018, fixed annuity sales were $26.3 billion, which means sales increased 40.9% in 2019.
“As private pensions fade away, annuities are helping retirees and near retirees use their hard-earned savings to create steady, guaranteed, lifetime income,” said Insured Retirement Institute (IRI) President and CEO Wayne Chopus.
Beacon Research data shows that fixed annuity sales have continued to show long-term upward trends, however some product types have dropped off this quarter.
- Fixed Index annuity sales dropped 7.5% to $18.1 billion when compared to fourth quarter 2018. However, this is a 24% increase compared to the same quarter last year.
- Book value annuity sales fell 7.4%. Again, this is a substantial increase (64%) over this time last year though.
- Market value adjusted (MVA) annuity sales were $6.2 billion in the first quarter, up 51.3% from the fourth quarter 2018 figures. MVA sales increased a whopping 85.8% year-over-year.
A slight increase in income annuity sales was also noted. For the entire fixed annuity market, there was $21.6 billion in qualified sales and $16.1 billion in non-qualified sales during the first quarter of 2019.
“Despite dips driven largely by interest-rate pressure,” said Beacon Research CEO Jeremy Alexander, “the steady long-term increase in fixed annuity sales speaks strongly to the need hard working Americans have for both income and safety of principal. This was evident in the first-quarter results that could be attributed to the market volatility experienced in late 2018 as well as during the first quarter. We continue to expect strong growth in the years ahead as these needs remain paramount for retirees and those planning for retirement.”
Morningstar further reported that variable net assets rose in the first quarter as volatile equity markets recovered. Sales rose 6.5% to $1.93 trillion. Other notable figures included:
- Allocation funds held $795.6 billion in VA assets, or 41.2% of the total.
- Equity funds held $597.8 billion, or 30.9% of total VA assets.
- Fixed accounts held $339.1 billion, or 17.8%.
Within the variable annuity market, there were $12.8 billion in qualified sales and $7.9 billion in non-qualified sales during the first quarter of 2019.
“Heightened volatility in the fourth quarter of 2018 and strong performance in the first quarter of 201 were both mitigated by the significant percentage of VA assets invested in allocation funds,” said Michael Manetta, senior quantitative analyst at Morningstar. “While still slightly lower than the historic high of over $2 trillion reached in the third quarter of 2018 and despite pressure from negative net asset flow, assets under management in variable annuities are over 80% higher than 10 years ago, and we anticipate sales resuming an upward trajectory as newer product types such as structured annuities come into broader use.”
Written by Rachel Summit
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