The numbers don’t lie: Fixed indexed annuities (FIAs) are hot.
According to LIMRA Secure Retirement Institute’s U.S. Individual Annuities Sales Survey for the fourth quarter, FIA sales enjoyed their best quarter — and year — ever. Whole-year 2015 FIA sales rose to an all-time high of $54.5 billion, representing a 13 percent increase over 2014 levels. FIA sales for the fourth quarter exploded to $16.1 billion, a whopping 32 percent higher than the same period of 2014.
“Indexed annuity sales have experienced eight consecutive years of positive growth,” Todd Giesing, assistant research director for LIMRA Secure Retirement Research, noted in a prepared statement. “The growth was driven by many companies, rather than just the top players as we have seen in the past. We also are seeing some companies who have traditionally been strong in the variable annuity market, focusing more attention on the indexed annuity market.”
At the same time that FIA sales have skyrocketed, sales of variable annuities have been falling. Variable annuities sales for 2015 dropped five percent from 2014 levels, while fourth-quarter sales decreased seven percent to $31.7 billion from the same quarter a year earlier, the lowest level since the first quarter of 2009. However, sales of all variable annuities are still more than double the sales of FIAs.
Cerulli Associates’ annual report on annuities and insurance for 2015 reveals that variable annuity (VA) flows peaked nine years ago in 2007, “at the height of the living benefit arms race, and subsequently plunged during and after the financial crisis,” according to the report. “VA flow growth has been non-existent over the past few years as insurers move away from selling living benefits.”