Non-Variable Annuity Sales Fall: Wink

Here’s a look at how sales of some of the types of annuities Wink tracks changed between the third quarter of 2018 and the latest quarter:

• Traditional fixed annuities: Down 14%
• Multi-year guaranteed annuity (MYGA) contracts: Down 13%

Interest Rates and Fixed Annuities

An “individual annuity contract” is really like a sausage casing, with the meat inside the casing being the issuers’ investments, reinsurance, derivatives, and other instruments for making money on assets and managing investment risk.

Partly because of the structure of state insurance laws and regulations, insurers tend to invest a majority of the assets supporting annuities in bonds and other debt securities.

Some of the factors that affect the issuers’ investment earnings include trends in the benchmark interest rates controlled by world governments, and the size of the gap between the interest rates countries like the United States pay and what high-rated corporate borrowers pay.

When the gap, or “spread,” between what insurers pay fixed annuity holders and what the insurers earn on their own investments narrows, insurers may respond by increasing product prices, trimming product features, or reducing or ending product sales.

Resources

A summary of the Wink annuity survey results is available here.

— Read Non-Variable Annuity Sales Continue to Climb, on ThinkAdvisor.

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