COVID-19 Chills Individual Annuity Sales
Indexed variable annuity sales managed to grow through the ice.
Indexed annuities that are registered as variable products continued to sell well in the second quarter, in spite of weak sales of most other types of individual annuities.
The Secure Retirement Institute — which calls indexed variable annuities “registered index-linked annuities,” or RILAs — says RILA sales increased 8% between the second quarter of 2019 and the latest quarter, to $4.5 million.
Resources
- 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 every other type of annuity fell, due both to the effects of COVID-19 on sales efforts and the effects of low interest rates and investment market volatility on insurers’ ability to offer attractive crediting rates.
Total U.S. annuity sales fell 24%, to $49 billion.
Many life insurers see selling indexed variable annuities as a relatively safe alternative to offering other types of annuities. The issuer of an indexed annuity filed as a non-variable product must guarantee the contract holder’s principal, no matter what happens in the bond markets and other financial markets. The issuer of an indexed variable annuity can limit itself to providing a defined amount of account value protection.
The Nuts and Bolts
The Secure Retirement Institute is is an arm of Windsor, Connecticut-based LL Global.
The LL Global arm creates quarterly annuity sales reports based on the results from a voluntary annuity issuer survey. The participating life insurers account for about 81% of U.S. individual annuity sales.
The Numbers
Here’s what happened to sales of some types of individual annuities between the second quarter of 2019 and the latest quarter:
- Indexed annuities that are registered with securities regulators as variable products: $4.5 billion (up 8%)
- Fixed-rate deferred annuities: $13 billion (down 1%)
- Variable annuities, excluding indexed variable annuities: $16 billion (down 24%)
- Indexed annuities that are classified as non-variable products: $12 billion (down 41%)
— Read After the Catastrophic 1918 Flu Pandemic, Annuities Did Fine, on ThinkAdvisor.
— Connect with ThinkAdvisor Life/Health on Facebook, LinkedIn and Twitter.