U.S. sales of individual non-variable annuities continued to look great in the second quarter, according to sales survey managers at Wink Inc. and the LIMRA Secure Retirement Institute.
Interest rates have started to fall, after rising gradually for several years. Todd Giesing, annuity research director at the LIMRA institute, said lower rates could hurt the numbers in future sales reports.
“There is usually a lag between in interest rates drops and sales declines,” Giesing said in a statement. “We anticipate sales to substantially drop in the third and fourth quarters.”
But the LIMRA institute found that U.S. sales of the individual non-variable annuities it tracks increased to $38 billion in the second quarter, up 12% from the sales figure it recorded for the second quarter of 2018.
(Related: Non-Variable Annuity Sales Continue to Climb)
Wink, which conducts a separate survey, found that sales of the U.S. individual, deferred, non-variable annuities it tracks increased 16% between the second quarter of 2018 and the latest quarter.
Wink did not publish a dollar value for second-quarter non-variable annuity sales in the new report, which is based on preliminary data.
The LIMRA institute picture looks different from the Wink picture partly because the LIMRA institute includes figures for immediate annuities and structured settlements in its results.
The LIMRA institute says overall variable annuity sales held stead at about $26 billion.
Sales of deferred variable annuities with results that are not tied to investment indexes fell 7%, to $22 billion.
Sales of indexed deferred variable annuities, which the LIMRA institute calls registered index-linked annuities, increased 66%, to $4.1 billion.
Why Falling Interest Rates Could Affect Future Results
Insurers assume that earnings on their investments will help them handle obligations to annuity holders and other customers with arrangements that are designed to stay in place for many years.
Because of the nature of the obligations, and state insurance regulator and rating agency rules, insurers tend to invest heavily in high-grade corporate bonds, mortgage-backed securities, and mortgage loans.
When interest rates fall, life insurers may cut the rates they offer new annuity purchasers, and life insurers may shift away from offering some types of benefits guarantees.
The issuers have to compete with bank certificates of deposit, and other types of conservative saving and investment products.
In some cases, sellers of all fixed-rate products may cut the rates they offer new customers in a similar fashion.
If life insurers cut their annuity crediting rates more quickly or more slowly than sellers of competing types of products, that could affect how likely consumers are to choose annuities over the competing products.
Wink bases its quarterly annuity sales reports on data from issuers. It says the new, preliminary report includes data from issuers that account for about 97% of total individual.
The LIMRA institute also bases its results on an issuer survey. It says the new report draws on data from issuers that account for about 95% of the U.S. individual annuity market.
Wink Survey Details
Here’s a look at how sales of some of the types of annuities Wink tracks changed between the second quarter of 2018 and the latest quarter:
- Indexed annuities filed as fixed products: Up 14%
- Traditional fixed annuities: Up 21%
- MYGA contracts: Up 20%%
- Structured annuities: Up 20%
LIMRA Secure Retirement Institute Annuity Sales Results Details
Here’s a look at how sales of some of the types of annuities the LIMRA institute tracks changed between the second quarter of 2018 and the latest quarter:
- Variable annuities (other than indexed): $22 billion (Down 7%)
- Indexed annuities filed as fixed annuities: $20 billion Up 14%)
- Book value annuities: $8.9 billion (Up 16%)
- Market-value-adjusted fixed annuities: $4.2 billion (Flat)
- Indexed annuities that are registered as variable annuities: $4.1 billion (Up 66%)
- Fixed immediate annuities: $2.7 billion (Up 8%)
- Structured settlements: $1.6 billion (Flat)
A summary of Wink’s preliminary results is available here.
A summary of the LIMRA’s results is available here.
— Read The Plain Vanilla Fixed Annuity Was the Q1 King, on ThinkAdvisor.