First quarter annuity sales numbers are in, and registered index-linked annuities (RILA) were the big winners. When compared to the previous year’s results, RILA sales jumped 38% to $4.9 billion, according to the final numbers released by the Secure Retirement Institute U.S. Individual Annuity Sales Survey.
“Current market conditions favor RILA products more than fixed indexed annuities (FIA) as the increase in market volatility will help support crediting rates in RILAs,” said senior annuity research director, Todd Giesing, in a recent InsuranceNewsNet article. “As a result, SRI is forecasting RILA sales to increase more than 10% in 2020 while FIA sales are expected to fall about 20%.”
The quarter was not as kind to FIA sales, which dropped 10% to $16.2 billion from first quarter 2019. This is the third quarter in a row of declines for FIAs, and they aren’t expected to rebound as long as interest rates remain low. SRI anticipates that annual sales of FIAs will not exceed $60 billion, which is well below the record sales of $73 billion set in 2019.
“Accumulation-focused FIAs without guaranteed lifetime benefit riders (GLB) experienced the greatest decline in the first quarter, down 13% compared with prior year,” added Giesing. “These products’ crediting rates continued to decline in the first quarter because of the unfavorable interest rates, which were further exacerbated by the significant rate drop in March.”
Also experiencing a drop in sales were fixed-rate deferred annuities, dropping 35% in the first quarter, compared to the same period last year. While sales fell, these numbers reflect a 4% increase when compared to fourth quarter of 2019, demonstrating investors desire for principal protection. SRI predicts these products will continue to experience improved sales despite the ultra-low interest rate environment.
“As we saw during the Great Recession, we expect fixed-rate deferred product sales to remain steady in the second quarter as consumers seek to protect their investment from market volatility and losses.”
Written by Rachel Summit