Reflecting regulatory outlook, rising rates
WINDSOR, Conn., May 22, 2018 – First quarter 2018 indexed annuity sales are up 11 percent to $14.5 billion, compared with first quarter 2017 and up 4 percent since last quarter, according to LIMRA Secure Retirement Institute’s (LIMRA SRI) First Quarter 2018 U.S. Retail Annuity Sales Survey.
This is the second strongest start to indexed annuities since LIMRA SRI starting tracking annuity sales. LIMRA SRI is forecasting indexed annuity sales will increase 5-10 percent in 2018.
“While we typically see a seasonal decline in the first quarter, for the first time in 8 years we saw growth in the indexed annuity market when compared to fourth quarter,” said Todd Giesing, annuity research director, LIMRA Secure Retirement Institute. “This uptick in sales is a combination of an improved outlook on a regulatory front, as well as rising interest rates creating the opportunity for more attractive rates.”
Overall, U.S. annuity sales were $51.8 billion; level with first quarter 2017 results.
Revised 2018 Outlook
“Due to the DOL fiduciary rule being vacated in April 2018 and the expectation for positive economic factors, we have revised our 2018 annuity forecast and now expect a 5-10 percent increase in annuity sales growth,” noted Giesing.
In the first quarter, variable annuity (VA) sales totaled $24.6 billion, down 1 percent from the prior year. This marks the 17th consecutive quarter of declines for VA sales.
“While this quarter wasn’t strong for VAs, we are seeing some companies introduce new products, raise crediting rates for guaranteed living benefit products and loosen restrictions on investments, said Giesing. “Combined with the vacated Department of Labor fiduciary rule, we expect VA sales will improve throughout the year. As a result, LIMRA SRI is forecasting VA sales to be 0-5 percent higher in 2018, compared with 2017 results.”
Fee-based VA sales increased 70 percent to $780 million in the first quarter, but still represent just 3 percent of the total VA market. To avoid confusion, structured VAs were renamed “registered indexed-linked annuities” and will be included in the overall VA sales figures. Registered index-linked annuity sales were $2.2 billion, an increase of 4 percent in the first quarter, compared with prior year, but sales did decline 6 percent when compared to the prior quarter. These products represent about 9 percent of the retail VA market.
Total fixed annuities remained flat in the first quarter, totaling $27.2 billion. Fixed annuities have outperformed VA sales seven out of the last eight quarters. LIMRA SRI expects overall fixed annuity sales to increase 10-15 percent in 2018. Sales of fixed-rate deferred annuities, (Book Value and MVA) fell 14 percent in the first quarter to $8.7 billion. After multiple quarters deviating from the 10-year treasury rate, this quarter the sales aligned with the treasury rate growth. LIMRA SRI predicts fixed-rate deferred sales will increase 15-20 percent in 2018.
First quarter single premium immediate annuity (SPIA) sales were up 5 percent in the first quarter to $2.1 billion, when compared to the same quarter last year. SPIA sales have remained relatively stagnant in the $2-$2.2 billion range for the past two years. Deferred income annuity (DIA) sales fell 6 percent in the first quarter 2018 to $515 million. This is the lowest DIA sales have been since the first quarter 2013. Overall, increasing interest rates and other economic factors leads LIMRA SRI to project total income (SPIA and DIA) annuity sales to grow 5-10 percent in 2018.
The first quarter 2018 Annuities Industry Estimates can be found in the updated Data Bank. To view variable, fixed and total annuity sales over the past 10 years, please visit Annuity Sales 2008-2017.
To view the top twenty rankings of total, variable and fixed annuity writers for first quarter 2018, please visit First Quarter 2018 Annuity Rankings. To view the top twenty rankings of only fixed annuity writers for first quarter 2018, please visit First Quarter 2018 Fixed Annuity Rankings.
LIMRA Secure Retirement Institute’s First Quarter U.S. Individual Annuities Sales Survey represents data from 96 percent of the market.