The Secure Retirement Institute Fourth Quarter U.S. Annuity Sales Survey was recently released showing the best annuity sales in over a decade. According to a recent InsuranceNewsNet article, annuity sales in 2019 topped $241.7 billion, increasing 3% over 2018.
Despite the overall sales being the best since 2008, annuity sales in the fourth-quarter actually dropped 8% when compared with the same time period in 2018.
“Fixed annuity sales have driven the overall growth for the annuity market over the past four years,” said Todd Giesing, director of annuity research, SRI. “Falling interest rates in the third quarter dampened fixed product sales in the second half of the year. As a result, most fixed products experienced declines in the fourth quarter, pulling down total annuity sales results for the quarter.”
Nearly 60% of the total annuity market is comprised of fixed annuities in 2019. Strong sales in the first half of the year allowed annual fixed annuity sales to top its previous sales record of $133.5 billion despite a significant dip in the fourth quarter. Total sales for fixed products in 2019 were $139.8 billion.
“Much of the overall growth in the fixed market can be attributed to the continued growth in the fixed indexed annuity market,” Giesing said. “FIA sales have increased 11 of the past 12 years, accounting for more than half of the fixed annuity market sales.”
In 2019, FIA sales were $73.5 billion, a 6% increase from 2018 and a new sales record.
Industry experts blame both low interest rates and an increase in interest in registered index-linked annuities for the drop in fourth-quarter FIA sales.
On the contrary, variable annuity (VA) sales have recorded growth for the third consecutive quarter. In the fourth quarter, VA sales were up 8% year-over-year at $26.8 billion. Overall, the sales of VA products were $101.9 billion in 2019, an increase of 2% from 2018, and the second consecutive year of growth. The growth in the VA market is attributed to a rise in registered index-linked annuity products (RILA), with sales reaching $4.9 billion, a 39% increase from the prior year.
“The impact of RILA sales on the overall VA market is significant. When you look at VA sales excluding RILAs, VA sales dropped 5% in 2019, compared to the 8% increase recorded with RILAs included,” Giesing said. “One of the things that is driving the growth in the RILA market is GLB riders. More than $400 million of fourth-quarter RILA sales were with GLB riders, representing 8% of the total RILA market.”
Written by Rachel Summit