Moderate Decline in Q1, Strong Gains from Year Ago
WASHINGTON, D.C. – Overall annuity sales fell 3.6 percent in the first quarter of 2019, with combined sales of fixed and variable annuities of $57.8 billion as compared to sales of $59.9 billion in the fourth quarter of 2018, according to the Insured Retirement Institute (IRI), based on data reported by Beacon Research and Morningstar, Inc. However, sales remain solidly above year ago levels, up 17.5 percent from total annuity sales of $49.2 billion in the first quarter of 2018.
Total annuity sales
$57.8 billion – industry-wide annuity sales in the first quarter of 2019
- 3.6 percent decrease from sales of $59.9 billion in the fourth quarter of 2018
- 17.5 percent higher than first quarter 2018 sales of $49.2 billion
Fixed Annuity Sales
$37.1 billion – 2019 first quarter fixed annuity sales
- 0.17 percent increase from fourth quarter sales of $37.0 billion
- 40.9 percent higher than 2018 first quarter sales of $26.3 billion
Variable annuity sales
$20.7 billion – 2019 first quarter variable annuity sales
- Down 9.8 percent versus 2018 fourth quarter sales of $22.9 billion
- 9.8 percent lower than 2018 first quarter VA sales of $22.9 billion
“As private pensions fade away, annuities are helping retirees and near retirees use their hard-earned savings to create steady, guaranteed, lifetime income,” said IRI President and CEO Wayne Chopus.
According to Beacon Research, fixed annuity sales continue their long-term upward trend, albeit with some product types showing lower sales versus the fourth quarter of 2018.
$18.1 billion – fixed indexed annuity sales off recent highs but significantly higher than this time last year.
- 7.5 percent decrease versus fourth quarter 2018 sales of $19.6 billion (a record setting quarter)
- 24 percent higher than 2018 first quarter sales of $14.6 billion
$8.2 billion – Book value annuity sales
- Book value sales fell 7.4 percent versus $8.9 billion in the fourth quarter of 2018
- 2019 first quarter sales were 64 percent higher than 2018 first quarter sales of $5.0 billion
$6.2 billion – Market value adjusted (MVA) annuity sales
- First quarter MVA sales were up 51.3 percent from 2018 fourth quarter sales of $4.1 billion
- MVA sales increased 85.8 percent versus first quarter 2018 sales of $3.3 billion
$3.3 billion – Income annuity sales
- Up 1.4 percent from 2018 fourth quarter income annuity sales of $3.28 billion
- 35 percent higher than 2018 first quarter income annuity sales of $2.5 billion
For the entire fixed annuity market, there were approximately $21.6 billion in qualified sales and $16.1 billion in non-qualified sales during the first quarter of 2019.
“Despite dips driven largely by interest rate pressure,” said Beacon Research CEO Jeremy Alexander, “the steady long-term increase in fixed annuity sales speaks strongly to the need hard working Americans have for both income and safety of principal. This was evident in the first quarter results that could be attributed to the market volatility experienced in late 2018 as well as during the first quarter. We continue to expect strong growth in the years ahead as these needs remain paramount for retirees and those planning for retirement.”
According to Morningstar, variable annuity net assets rose in the first quarter as equity markets recovered from a period of above average volatility in the fourth quarter of 2018.
$1.93 trillion – Variable annuity assets rose 6.5 percent from just over $1.8 trillion in the fourth quarter of 2018, as market volatility eased and stocks posted solid gains.
- Allocation funds held $795.6 billion in VA assets, or 41.2 percent of the total.
- Equity funds held $597.8 billion, or 30.9 percent of total VA assets.
- Fixed accounts held $339.1 billion, or 17.8 percent.
Net asset flows in variable annuities were -$24.8 billion in the first quarter, 22.5 percent higher net outflow than $20.3 billion in the fourth quarter of 2018 and 34.6 percent higher than $18.4 billion in net outflow recorded in the first quarter of 2018. Within the variable annuity market, there were $12.8 billion in qualified sales and $7.9 billion in non-qualified sales during the first quarter of 2019.
“Heightened volatility in the fourth quarter of 2018 and strong performance in the first quarter of 2019 were both mitigated by the significant percentage of VA assets invested in allocation funds,” said Michael Manetta, Senior Quantitative Analyst at Morningstar. “While still slightly lower than the historic high of over $2 trillion reached in the third quarter of 2018 and despite pressure from negative net asset flow, assets under management in variable annuities are over 80 percent higher than 10 years ago, and we anticipate sales resuming an upward trajectory as newer product types such as structured annuities come into broader use.”
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About Morningstar, Inc.: Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for individual investors, financial advisors, asset managers, retirement plan providers and sponsors, and institutional investors in the private capital markets. Morningstar provides data and research insights on a wide range of investment offerings, including managed investment products, publicly listed companies, private capital markets, and real-time global market data. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $200 billion in assets under advisement and management as of March 31, 2019. The company has operations in 27 countries.
About Beacon Research: Beacon Research is an independent research company and application service provider founded in 1997 and based in Northfield, Ill. Beacon tracks fixed and variable annuity features, rates and sales. Its quarterly Fixed Annuity Premium Study is the first and only source to analyze fixed annuity sales at the product level, and the first to make a decade’s worth of sales information available to subscribers online at www.annuitymarketstudy.com. Beacon lowers compliance risk and increases fixed annuity sales with 100% carrier-approved, comprehensive product profiles, spreadsheets and search tools for the advisor/rep websites of banks, TPMs, broker-dealers and marketing organizations. Carriers and financial institutions use its systems at www.annuitynexus.com for compliance review of 1035 exchanges, sales support, conservation and product research. Beacon also licenses information to other platforms. Directly and through licensees, Beacon information can be accessed by hundreds of financial institutions and thousands of advisors.