Industry-wide annuity sales in the first quarter of 2018 totaled $49.1 billion, a 1.2 percent increase over sales of $48.5 billion during the fourth quarter of 2017, and a 0.6% decrease from sales of $49.3 billion in the first quarter of 2017.
The Insured Retirement Institute (IRI) announced final first quarter sales results for the U.S. annuity industry late last week, based on data reported by Beacon Research and Morningstar, Inc.
According to Beacon Research, fixed annuity sales during the first quarter were $26.2 billion, a 6.7 percent increase over fourth quarter 2017 sales of $24.6 billion and a 0.8 percent increase from sales of $26.0 billion during the first quarter of 2017. Variable annuity total sales were $22.9 billion in the first quarter of 2018, according to Morningstar. This was a 4.2 percent decrease from sales of $23.9 billion in the prior quarter, and a 1.7 percent decline from sales of $23.3 billion in the first quarter of 2017.
“It’s encouraging to see annuity sales on the rise, despite recent regulatory challenges causing marketplace disruption,” said IRI President and CEO Cathy Weatherford. “IRI research shows that American consumers planning for, and living in, retirement need and desire solutions that can provide them with income they cannot outlive, and that can help protect the financial assets they’ve worked so hard to build. The insured retirement industry continues to innovate and deliver the solutions that will help millions of Americans prepare for and enjoy a secure retirement, and rising sales reflect the success of those efforts.”
According to Beacon Research, fixed indexed annuity sales also rose, by 4.6% relative to the fourth quarter of 2017, and by 12.3% over the first quarter of 2017. Overall, fixed annuity sales were comprised of approximately $15.1 billion in qualified sales and $11.1 billion in non-qualified sales during the first quarter of 2018.
“Fixed indexed sales came roaring back in the first quarter as market volatility picked up and consumers sought the relative safety and growth potential of fixed indexed annuities,” said Beacon Research CEO Jeremy Alexander. “We are seeing both increased demand for principal guarantee fixed indexed products, and a rapidly developing market for structured annuities, where downside risk is shared by the consumer and insurer. We expect this market to continue to gain strength.”
According to Morningstar, variable annuity net assets fell 1.6% to $1.95 trillion during the first quarter of 2018, vs. fourth quarter 2017 net assets of $1.99 trillion. On a year-over-year basis, assets rose 0.6%, from $1.94 trillion at the end of the first quarter of 2017. Net flows in variable annuities were -$18.4 billion in the first quarter. Within the variable annuity market, there were $14.5 billion in qualified sales and $8.4 billion in non-qualified sales during the first quarter of 2018, with both qualified and non-qualifies sales down versus the fourth quarter of 2017.
“Variable annuities continue to face challenges regaining their footing in the wake of transaction processing disruptions born of the past few years’ efforts to comply with the now vacated DOL fiduciary rule, coupled with increased market volatility and negative net flows putting pressure on asset values,” said John McCarthy, Senior Product Manager at Morningstar. “However, we expect sales to recover as business processes normalize and sales increase in newer product types, such as structured and fee-based annuities.”
About Morningstar: Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for individual investors, financial advisors, asset managers, retirement plan providers and sponsors, and institutional investors in the private capital markets.
About Beacon Research: Beacon Research is an independent research company and application service provider founded in 1997 and based in Northfield, Ill. Beacon tracks fixed and variable annuity features, rates and sales. Its quarterly Fixed Annuity Premium Study is the first and only source to analyze fixed annuity sales at the product level, and the first to make a decade’s worth of sales information available to subscribers online at www.annuitymarketstudy.com. Beacon lowers compliance risk and increases fixed annuity sales with 100% carrier-approved, comprehensive product profiles, spreadsheets and search tools for the advisor/rep websites of banks, TPMs, broker-dealers and marketing organizations. Carriers and financial institutions use its systems at www.annuitynexus.com for compliance review of 1035 exchanges, sales support, conservation and product research. Beacon also licenses information to other platforms. Directly and through licensees, Beacon information can be accessed by hundreds of financial institutions and thousands of advisors.
About the Insured Retirement Institute: The Insured Retirement Institute (IRI) is the leading association for the retirement income industry. IRI proudly leads a national consumer coalition of more than 30 organizations, and is the only association that represents the entire supply chain of insured retirement strategies. IRI members are the major insurers, broker-dealer/distributors, asset managers, and 150,000 financial professionals. As a not-for-profit organization, IRI provides an objective forum for communication and education, and advocates for the sustainable retirement solutions Americans need to help achieve a secure and dignified retirement. Learn more at www.irionline.org.