In 2016, total fixed annuity sales hit a record-breaking $117.4 billion, 14 percent higher than 2015 levels and nearly $7 billion higher than 2009 (when sales were last at their highest), according to LIMRA Secure Retirement Institute’s Fourth Quarter U.S. Annuity Sales survey.
Related: Annuities for retirement income
LIMRA Secure Retirement Institute’s fourth quarter U.S. Individual Annuities Sales Survey represents data from 96 percent of the market.
After strong results in the first three quarters, fixed annuity sales fell 13 percent to $25.7 billion in the fourth quarter.
“Unlike the last several years where indexed annuities propelled overall fixed annuity growth, in 2016, fixed-rate deferred was the primary driver of fixed sales in 2016,” said Todd Giesing, assistant research director, LIMRA Secure Retirement Institute. “A large block of fixed-rate deferred annuities purchased in 2009 came due in the first half of the year, creating a significant amount of money in motion.”
In the fourth quarter, sales of fixed-rate deferred annuities, (Book Value and MVA) fell 9 percent, to $7.7 billion. In 2016 fixed-rate deferred product sales were $38.7 billion, up 25 percent. The Institute expects sales to rebound in the first quarter 2017, responding to the post election interest rate spike late in 2016.
As projected by the Institute, fixed indexed annuity (FIA) sales also hit record levels in 2016, up 12 percent to $60.9 billion.
“Despite lower than expected sales in fourth quarter (down 13 percent from prior year), fixed annuities held on to break its 2015 sales record. This marks the ninth consecutive year of growth for FIAs,” Giesing said. “We have noticed FIA sales have declined quarter over quarter since the Department of Labor (DOL) reclassified FIAs under the best interest contract exemption. Until there is some clarity on the DOL fiduciary rule, the Institute expects sales to continue to drop in 2017.”
Despite the 85 basis point jump in the 10-year Treasury interest rate, fixed immediate annuity sales fell 23 percent in the fourth quarter to $2.0 billion. In 2016, fixed immediate income annuities grew 1 percent to $9.2 billion.
Deferred income annuity (DIA) sales fell 30 percent in the fourth quarter to $575 million. Year-end DIA sales increased 4 percent to $2.8 billion.
“Until yields come up, consumers are going to resist giving up liquidity for the guaranteed income offered through income annuities,” said Giesing. “That said, demographics are in our favor, we expect slow steady growth in the income annuity market.