COVID-19 Takes a Toll on Annuity Sales, Assets Under Management Recover

WASHINGTON, D.C. – Sales of fixed and variable annuities were $46.9 billion in the second quarter of 2020, a drop of 10.7 percent from first quarter 2019 sales of $52.6 billion, according to the Insured Retirement Institute (IRI), which today announced final second quarter 2020 market data for the U.S. annuity industry based on data reported by Beacon Annuity Solutions and Morningstar, Inc.

Total fixed annuity sales fell 3.8 percent to $26.5 billion, as compared to $27.6 billion in the first quarter of 2020. Variable annuities fell 18.4 percent to $20.4 billion from $25.0 billion in the first quarter. The drops were not unexpected given the impact of the COVID-19 pandemic.

Book value and market value adjusted fixed annuities saw significant increases in sales as investors fled to quality due to extreme market volatility during the second quarter; book value sales rose 47.2 percent and market value adjust sales increase 28.8 percent versus the first quarter, but a 25.3 percent drop in fixed indexed annuities, which make up almost 60 percent of total fixed sales, resulted in the reduction in overall fixed sales. Income annuity sales were also down, falling 24 percent from first quarter levels.

Sales of variable annuities other than structured products (variable products that use index options to provide both upside potential and downside protection) fell 21.5 percent to $15.9 billion from first quarter sales of $20.2 billion, while structured annuities fell 5.1 percent to $4.5 billion from $4.8 billion.

In the fixed market, $14.3 billion of sales were in qualified plans and $12.2 billion were in non-qualified. Within variable annuity sales, $14.0 billion were in qualified and $6.4 billion were in non-qualified.

According to Morningstar, variable annuity net assets rose 10.7 percent, to $1,887.1 billion from $1,704.7 billion at the end of the first quarter as markets recovered from the initial shock of COVID-19. Equity funds, which took the worst hit in the first quarter, rose 20.2 percent in Q2, while allocation funds rose 14.7 percent. Net asset flows in variable annuities were -$13.6 billion in the second quarter, the least negative asset flow result since the fourth quarter of 2016.

Click here for tables providing a detailed breakdown of annual and quarterly sales by annuity type, and variable annuity assets by investment category.

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Contact: Dan Zielinski