Many top annuity issuers say they have responded to the recent cuts in interest rates by tightening benefits and increasing prices.
Issuers’ efforts to rate-proof their annuity units may be starting to show up in annuity sales.
Overall sales of U.S. individual annuities fell 8% between the fourth quarter of 2018 and the fourth quarter of 2019, to $58 billion, according to new Secure Retirement Institute insurer survey results summary.
- A copy of the latest Secure Retirement Institute survey summary is available here, and a copy of the underlying summary data is available here.
- An article about annuity sales figures for the third quarter of 2019 is available here.
Sales of all kinds of fixed annuities, including indexed annuities classified as non-variable products, fell 18% between the fourth quarter of 2018 and the latest quarter, to $38 billion, according to the survey results summary.
Sales of variable annuities increased 8%, year-over-year, to $27 billion for the quarter.
Here’s what happened to sales of some types of annuities included in the survey results summary:
- Book value fixed annuities: $6.4 billion (down 35%)
- Indexed annuities that are classified as non-variable products: $17 billion (down 13%)
- Variable annuities, excluding indexed variable annuities: $22 billion (up 3%)
- Indexed variable annuities: $4.9 billion (up 39%)
- Fixed immediate annuities: $2.1 billion (down 22%)
For all of 2019, overall sales of all U.S. individual annuities increased 3%, to $242 billion.
Full-year fixed annuity sales increased 5% between 2018 and 2019, to $140 billion.
Full-year variable annuity sales rose 2%, to $102 billion.
Where Interest Rates Come In
Life insurers depend heavily on investments in corporate bonds, mortgage-backed securities and other fixed-rate assets to support insurance and annuity obligations.
Interest rate cuts may reduce the yields on those fixed-rate investments. When life insurers’ investment yields fall, that can hurt the performance of blocks of insurance policies and annuity contracts that offer guarantees.
The issuer of a fixed annuity, including an indexed annuity filed as a non-variable product, promises to protect the holder against any loss of account value resulting from poor investment returns.
The issuer of a variable annuity can limit how much protection, if any, a contract provides against loss of principal.
The Secure Retirement Institute
LIMRA — a unit of LL Global Inc., which also owns LOMA — started the Secure Retirement Institute in 2013. In the past, that organization was known as the LIMRA Secure Retirement Institute.
LL Global is now referring to that organization as the Secure Retirement Institute.
— Read 5 Things Annuity Issuer Executives Are Saying Now, on ThinkAdvisor.