Total annuity sales in the second quarter of 2018 hit $59.5 billion, a 10% increase from the second quarter 2017 results and 15% higher than the first quarter of the year, according to LIMRA Secure Retirement Institute Second Quarter 2018 Sales Survey, released Aug. 21.
The last time sales were at this level was in the first quarter of 2015.
Fixed annuity sales drove most of this quarter’s growth, which have outperformed variable annuity (VA) sales in eight of the last 10 quarters.
Year-to-date, total annuity sales were $111.3 billion, 5% higher than sales results from the first half of 2017. LIMRA SRI expects a 5-10% increase for annuity sales this year and 0-5% growth in 2019.
Fixed indexed annuity (FIA) sales were $17.6 billion, 17% higher than second quarter 2017 and 21% higher than first quarter sales results and in fact shattering a record for FIA sales in any quarter.
“This quarter’s FIA sales topped the record set in the fourth quarter 2015 by 12%,” said Todd Giesing, annuity research director, LIMRA Secure Retirement Institute. “Growth was widespread with all of the top 10 manufacturers reporting double-digit growth from the first quarter 2018. Clearly, with the Department of Labor’s (DOL) fiduciary rule vacated and the prospect of continued rising interest rates, demand for this product is high.”
In the first half of 2018, FIA sales were 32.1 billion, 14% higher than the first half of 2017.
Fee-based FIA sales were $67 million in the second quarter. Fee-based FIAs represent than one-half of one percent of the total FIA market.
LIMRA SRI is forecasting FIA sales to grow 5-10% in 2018 – exceeding the prior annual record of $59.1 billion – and expects FIA sales to continue to show growth in 2019 and 2020.
After 17 consecutive quarters of declines, VA sales improved 2% to $25.8 billion in the second quarter. VA sales were $50.4 billion in the first two quarters of 2018, level with prior year results.
“Despite introducing of new products and making changes to enhance their existing products to make them more competitive, companies are not having the same success with VAs as they are with fixed annuities,” Giesing said. “However, the new and enhanced VAs, combined with the vacated DOL rule and better economic conditions, have led to slightly improved sales.”
Fee-based VAs sales were $850 million in the second quarter. While this is a 49% increase over second quarter 2017, fee-based products still only represent 3.3% of the total VA market.
In the second quarter, registered indexed-linked annuity sales increased 6% from prior year to $2.5 billion. With rising interest rates, sales growth has slowed as other product options have become more attractive. Currently these products represent 10% of the retail VA market.
LIMRA SRI predicts total VA sales to increase less than 5% in 2018.
Total fixed annuity sales were $33.7 billion in the second quarter, improving 18% compared with the second quarter 2017 results. Year-to-date, total fixed annuity sales were $60.9 billion, 9% higher than the first half of 2017.
Sales of fixed-rate deferred annuities (Book Value and MVA) benefited from the higher interest rates, up 23% in the second quarter to $11.4 billion. Quarterly sales have not been this high since the first quarter 2016.
Year-to-date, fixed rate deferred annuity sales were $20.1 billion, 4% higher than the same period of 2017.
“We believe fixed-rate deferred sales will have a strong second half of the year, based on the prospect of continued interest rate increases,” Giesing said. LIMRA SRI predicts fixed-rate deferred annuity sales to increase 15-20% this year and as much as 25% in 2019.
Immediate income annuity sales jumped 14% in the second quarter to $2.5 billion. This represents the highest quarterly sales in two years. In the first half of 2018, immediate income annuity sales were $4.6 billion, 10% higher than prior year.
The only annuity product that did not see positive sales growth was deferred income annuities (DIA). DIA sales dropped 4% in the second quarter, to $575 million. DIA sales were $1.1 billion in the first half of 2018, down 5% from prior year.
“Rising interest rates will benefit income annuity sales. LIMRA SRI is forecasting 5-10% growth in 2018, Giesing said. “These products offer a unique value for retirees and pre-retirees seeking protected accumulation and guaranteed lifetime income features.”
Second quarter 2018 Annuities Industry Estimates and the 10-year annuity sales trends are located in LIMRA’s Data Bank.
To view the top twenty rankings of total, variable and fixed annuity writers for first half of 2018, please visit Second Quarter 2018 Annuity Rankings. To view the top twenty rankings of only fixed annuity writers for first half of 2018, please visit Second Quarter 2018 Fixed Annuity Rankings.
LIMRA Secure Retirement Institute’s Second Quarter U.S. Individual Annuities Sales Survey represents data from 95% of the market.
About LIMRA Secure Retirement Institute: LIMRA Secure Retirement Institute provides comprehensive, unbiased research and education about all aspects within the retirement industry to improve retirement readiness and promote retirement security. For more information, please visit www.secureretirementinstitute.com.