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Life Health > Annuities > Variable Annuities

Fixed Index Annuity Sales Shine in Third Quarter: IRI

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Fixed index annuities continue to be one of the fastest-growing annuity products in the market, rising to record levels in year-over-year sales for the third quarter while also achieving a slight increase in sales over the second quarter according to industry data reported Wednesday.

The third quarter of 2018 saw a record $18 billion in sales for fixed indexed annuities, according to the Insured Retirement Institute. This represents a 2.1% increase versus 2018 second-quarter sales and a 38.7% uptick over 2017 third-quarter sales.

The IRI tally of third-quarter market data for the U.S. annuity industry is based on data reported by Beacon Research and Morningstar, Inc.

However, variable annuity sales were down 4.4% versus the second quarter to $23 billion, while managing to rise 10.1% over the previous year’s third quarter. The IRI attributed the quarter over quarter slump to the lingering effects of the now-vacated Department of Labor’s fiduciary rule last spring.

(Related: Anti-Annuity Stance Softening Among Advisors and Investors)

Variable annuities apparently hit a snag when the DOL fiduciary rule was being implemented, before it got thrown out by the courts, according to IRI spokesman Dan Zielinksi.

There were $14.9 billion in qualified sales in the variable annuity market, down 3.7% from the second quarter, and $8.1 billion in non-qualified sales during the third quarter, a 5.5% drop from second quarter non-qualified sales.

Variable annuity net assets did rise almost 2% to $2 trillion in the third quarter, which Morningstar attributed to the bull market in equities pushing valuations higher in subaccount assets. These net assets were also up 2.4% year over year.

IRI President and CEO Cathy Weatherford said in a statement that variable annuities should rebound in the fourth quarter and into 2019 along with other annuity products’ growth.

Annuity sales overall are rising, with year-to-date sales up 7.1% for the year over the same period in 2017, reaching $159.3 billion.

Total annuity sales for the third quarter reached almost $55 billion, again dipping a bit from the second quarter but rising 20% from the year-ago quarter, according to the industry research.

“We are pleased to see the year over year growth in variable annuities and hope that the trend continues variable annuity sales will see further growth in the coming year,” Zielinski said in an email.

The sharpest drop-off in annuity product sales from the second quarter appears to be in income annuities, which were down 5.8% from the second quarter, hitting $2.7 billion, although they were still higher than the third quarter 2017.

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