Overall annuity sales fell 3.6% in the first quarter of 2019 compared to the fourth quarter of 2018, but sales were still solidly above the first quarter of 2018, when the yet-to-be-vacated DOL Fiduciary Rule still loomed large.
Combined sales of fixed and variable annuities totaled $57.8 billion in Q1 2019 while sales were $59.9 billion in the Q4 2018, according to the Insured Retirement Institute (IRI), based on recently released data reported by Beacon Research and Morningstar, Inc. However, that Q1 level marked a 17.5% increase from total annuity sales of $49.2 billion in Q1 2018.
“As private pensions fade away, annuities are helping retirees and near retirees use their hard-earned savings to create steady, guaranteed, lifetime income,” said IRI President and CEO Wayne Chopus.
Q1 2019 fixed annuity sales totaled $37.1 billion – a minimal 0.17% increase from Q4 2018 sales of $37.0 billion but a significant 40.9% higher than 2018 Q1 sales of $26.3 billion.
According to Beacon Research, fixed annuity sales continue their long-term upward trend, albeit with some product types showing lower sales vs. the fourth quarter of 2018.
“Despite dips driven largely by interest rate pressure, 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,” said Beacon Research CEO Jeremy Alexander. “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.”
Variable annuity sales in Q1 2019 totaled $20.7 billion, down 9.8% vs. Q4 2018 sales of $22.9 billion and 9.8% lower than Q1 2018 VA sales of $22.9 billion.
Fixed indexed annuity sales fell off from recent highs but remain significantly higher than this time last year.
FIA sales decreased to $18.1 billion, a 7.5% decrease vs. Q4 2018 sales of $19.6 billion (a record setting quarter), but 24% higher than Q1 2018 sales of $14.6 billion.
According to Morningstar, variable annuity net assets rose in the first quarter as equity markets recovered from a period of above average volatility in the fourth quarter of 2018.
“Heightened volatility in the fourth quarter of 2018 and strong performance in the first quarter of 2019 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.”
Click here to see the complete report from IRI.