Sales of fixed annuities increased 48 percent to $32.3 billion during the first quarter, according to LIMRA Secure Retirement Institute’s first-quarter U.S. retail annuity sales survey.
All retail fixed products experienced double-digit growth compared with the prior year, the institute said.
Fixed annuities lifted total annuity sales to $58.9 billion during the quarter, a 9 percent increase frm last year. This is the third consecutive quarter of positive growth in annuity sales, the institute said.
“The start of the year saw tremendous volatility with steep declines in the equity markets, falling nearly 10 percent within the first three weeks,” noted Todd Giesing, assistant research director, LIMRA Secure Retirement Institute. “While it did rebound into positive territory by the end of the quarter, the substantial volatility hurt VA sales and helped fixed products as people sought out safety being offered in indexed and fixed-rate deferred products.”
Sales of variable annuites were down 18 percent to $26.6 billion during the first quarter, the lowest level of VA sales since 2001. The trend affected the entire industry, with 19 of the top 20 manufacturers reporting decreases.
VA sales are likely to continue to decrease, with a predicted drop of 15 to 20 percent this year and 25 to 30 percent next year. The Department of Labor’s fiduciary rule will likely contribute to decreases in VA sales next year, the institute said.
“We are seeing a significant shift in the annuity market,” said Giesing. “In the first quarter, VA sales had a 45 percent market share, compared with a 60 percent market share just a year ago. We have to go back 20 years — to 1995 — to find when the VA market share was 45 percent or lower.”
Indexed annuity sales increased 35 percent to $15.7 billion, with all of the top 10 writers reporting increases. Indexed annuity sales have experienced eight consecutive years of positive growth, said the institute, which forecasts continued strong growth for the products this year.
“We believe annuity manufacturers and advisors started to focus on indexed annuities in anticipation of the final DOL fiduciary rule, not knowing that indexed would be pulled under the BICE in the final rule,” Giesing said.
Sales of fixed-rate deferred annuities were up 90 percent in the first quarter. The institute said it is not uncommon to see fixed-rate deferred sales spike during times of heightened equity market volatility.