Fixed Indexed Annuity Sales Jump, VA Ticks Up
WASHINGTON, D.C. – The Insured Retirement Institute (IRI) today announced final second-quarter sales results for the U.S. annuity industry, based on data reported by Beacon Research and Morningstar, Inc.
Industry-wide annuity sales in the second quarter of 2017 totaled $50.4 billion, a 2.4 percent increase from sales of $49.2 billion during the first quarter of 2017, and a 9.8 percent decline from sales of $55.9 billion in the second quarter of 2016.
According to Beacon Research, fixed annuity sales during the second quarter of 2017 rose to $26.7 billion, a 3.1 percent increase over sales of $25.9 billion during the first quarter of 2017 and a 9.5 percent decline from sales of $29.5 billion during the second quarter of 2016. Variable annuity total sales were $23.7 billion in the second quarter of 2017, according to Morningstar. This was a 1.7 percent increase over sales of $23.3 billion in the prior quarter and a 10.2 percent decline from sales of $26.4 billion in the second quarter of 2016.
“IRI is pleased to report that fixed indexed annuity sales rose ten percent in the second quarter of 2017,” said IRI President and CEO Cathy Weatherford, “and it is also encouraging to see growth in industry-wide sales of annuities. IRI believes annuity sales will continue to increase as thousands of Americans enter retirement each day and seek solutions that will provide them with secure sources of income throughout their retirement years.”
According to Beacon Research, the increase in total fixed annuity sales was led by sales of fixed indexed products. Fixed indexed annuity sales rose 10 percent to $14.9 billion from $13.6 billion in the first quarter of 2017, though sales were down 7.1 percent from second quarter 2016 sales of $16.1 billion.
Overall fixed annuity sales also rose on strong sales of income annuities, with sales of $2.8 billion, an 11 percent increase over first quarter income annuity sales of $2.5 billion. Book value and market value adjusted (MVA) annuities, combined sales of which were $9.0 billion, fell 7.7 percent relative to first quarter sales of $9.8 billion, and were down 8.9 percent versus second quarter 2016 sales of $9.9 billion. For the entire fixed annuity market, there were approximately $15.1 billion in qualified sales and $11.6 billion in non-qualified sales during the second quarter of 2017.
“Amid the headwinds of DOL implementation and spread compression, fixed annuity sales posted an increase,” said Beacon Research CEO Jeremy Alexander, “and consumer demand for conservative retirement income products continues to drive strong sales.”
According to Morningstar, variable annuity net assets rose 1.8 percent to $1.98 trillion during the second quarter of 2017. On a year-over-year basis, assets increased 5.1 percent, from $1.88 trillion at the end of the second quarter of 2016, as positive market performance continued to overcome the impact of lower sales and negative net flows. Net flows in variable annuities were -$14.8 billion in the second quarter. Within the variable annuity market, there were $15.3 billion in qualified sales and $8.4 billion in non-qualified sales during the second quarter of 2017. Qualified sales fell 1.8 percent from first quarter sales of $15.6 billion, while sales of non-qualified variable annuities rose 8.6% from first quarter sales of $7.7 billion.
“While total variable annuity sales rose slightly,” said John McCarthy, Senior Product Manager at Morningstar, “the largest increases were in non-qualified sales. We are also seeing growth in newer investment oriented products such as structured annuities. These products offer tax deferral, growth potential and downside protection, and the ability to selectively convert account value to guaranteed lifetime income. Sales of structured variable annuities are on the rise, climbing to $1.6 billion in the second quarter of 2017, or 6.7 percent of total variable annuity sales, as compared to $1.2 billion, or 4.5 percent of sales, in the second quarter of 2016.”
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*Total Premium Sales, also called Total Premium Flows, represents the sum of new sales [all first-time buyers of a contract, including inter- and intra-company exchanges] and additional premiums from existing contract owners. Net Sales, also called Net Flows, represents Total Premium Sales minus surrenders, withdrawals, inter- and intra-company exchanges, and benefit payments.
**Morningstar estimates net sales based on a calculation methodology used across all investment universes for which Morningstar collects and publishes asset and performance data, including global open end mutual funds, separate accounts, and exchange traded funds.