IRI Issues 2018 Third Quarter Annuity Sales Report

Fixed Indexed Annuity Sales, VA Assets Hit Record Highs

WASHINGTON, D.C. – Fixed index annuity sales and variable annuity assets hit record quarterly highs according to the Insured Retirement Institute (IRI), which today announced final 2018 third-quarter market data for the U.S. annuity industry based on data reported by Beacon Research and Morningstar, Inc.

Total Annuity Sales

  • $54.9 billion - industry-wide annuity sales in the third quarter of 2018
    • 2.0 percent decrease from sales of $56.0 billion during the second quarter of 2018
    • 20.0 percent higher versus third quarter of 2017 sales of $45.8 billion
  • $159.3 billion – year to date total annuity sales
    • 7.1 percent increase versus 2017 third quarter year-to-date sales of $148.8 billion

Fixed Annuity Sales

  • $31.8 billion – 2018 third quarter fixed annuity sales
    • Virtually flat compared to second quarter
    • 40.9 percent higher versus 2017 third quarter sales of $22.6 billion

Variable Annuity Sales

  • $23.0 billion – 2018 third quarter variable annuity total sales
    • down 4.4 percent versus 2017 second quarter sales of $24.1 billion
    • 10.1 percent higher versus 2017 third quarter VA sales of $20.9 billion

“While sales dipped a bit in the third quarter, we believe annuity sales will continue to improve given the reduction in disruption and uncertainty following the demise of the DOL fiduciary rule last spring,” said IRI President and CEO Cathy Weatherford. “We expect fourth quarter sales to remain strong and continue into 2019,” she added. “Variable annuities also should rebound as Americans perceive a greater need for solutions to protect their investable assets and retirement income from market volatility.”

According to Beacon Research, fixed annuity sales were robust across all product types.

  • $18.0 billion – Record sales for fixed indexed annuities reached in 2018 third quarter.
    • 2.1 percent increase versus 2018 second quarter sales of $17.6 billion
    • 38.7 percent higher versus 2017 third quarter sales of $13.0 billion
  • $7.0 billion - Book value annuities sales were virtually flat in 2018 third quarter
    • 2018 third quarter sales 56.4 percent higher versus 2017 third quarter sales of $4.4 billion
  • $4.1 billion - Market value adjusted (MVA) annuities sales
    • Down 4.3 percent versus 2018 second quarter sales of $4.3 billion
    • 53.3 percent higher than third quarter 2017 sales of $2.7 billion
  • $2.7 billion - Income annuity sales fell
    • 5.8 percent decrease versus 2018 second quarter income annuity sales of $2.9 billion
    • 11.3 percent higher versus 2017 third quarter income annuity sales of $2.5 billion

For the entire fixed annuity market, there were approximately $17.9 billion in qualified sales and $13.9 billion in non-qualified sales during the 2018 third quarter.

“Fixed indexed annuities continue to lead the charge, reaching yet another record levels in the third quarter,” said Beacon Research CEO Jeremy Alexander, “and we expect all fixed annuity product types to continue showing robust growth in 2019 in an investment environment that is likely to be marked by higher interest rates and increased market volatility.”

According to Morningstar, variable annuity net assets rose in the third quarter as the bull market in equities continued to drive higher valuations in subaccount assets.

  • $2.0 trillion – 2018 third quarter variable annuity assets grew 1.9 percent versus 2018 second quarter assets of $1.67 trillion
    • 2.4 percent higher versus 2017 third quarter variable annuity assets of $1.96 trillion

Net asset flows in variable annuities were -$19.4 billion in the third quarter, an 8.1 percent improvement over -$21.1 billion in the second quarter of 2018.

Within the variable annuity market, there were $14.9 billion in qualified sales and $8.1 billion in non-qualified sales during the third quarter of 2018. Qualified sales fell 3.7 percent from second quarter qualified sales of $15.5 billion, while sales of non-qualified variable annuities were down 5.5 percent from second quarter non-qualified sales of $8.6 billion.

“Strong market performance pushed assets under management past $2 trillion, reaching a new all-time high,” said Michael Manetta, Senior Quantitative Analyst at Morningstar, “and while we still see weakness in VA sales, levels are recovering from record lows reached last year, and sales should continue to improve in 2019 as rising interest rates have a positive effect on lifetime income benefit features and insurer risk capacity.”

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