Fixed Indexed Annuity Sales Spiked in Second Quarter

Fixed indexed annuity (FIA) sales clocked in at $17.6 billion for the second quarter of 2018, according to data shared by the LIMRA Secure Retirement Institute (LIMRA SRI), finishing 17% higher than the second quarter of 2016 and 21% higher than first quarter sales results.

Todd Giesing, annuity research director for LIMRA SRI, says the quarter’s fixed indexed annuity (FIA) sales shattered the record set in the fourth quarter 2015 by 12%.  

“Growth was widespread with all of the top 10 manufacturers reporting double-digit growth from the first quarter 2018,” Giesing explains. “Clearly, with the Department of Labor’s (DOL) fiduciary rule vacated and the prospect of continued rising interest rates, demand for this product is high.”

In total, for he first half of 2018, fixed indexed annuity sales topped $32 billion, 14% higher than the first half of 2017. Despite the lingering influence of the defunct DOL fiduciary rule, still the vast majority of these products are sold on a commission basis. In fact, according to LIMRA SRI data, fee-based sales in this annuity category were just $67 million in the second quarter. This means fee-based fixed indexed annuities represent “less than one-half of one percent of the total FIA market.”

Looking ahead, LIMRA SRI forecasts FIA sales to grow between 5% and 10% for 2018, exceeding the prior annual record of $59.1 billion. The expectation is that FIA sales will also continue to show strong growth in 2019 and 2020.

LIMRA SRI highlights how fixed annuity sales drove most of this quarter’s annuity market growth. With the latest quarterly results, FIA sales have outperformed variable annuity (VA) sales in eight of the last 10 quarters. Still, after 17 consecutive quarters of declines, VA sales improved 2% to $25.8 billion in the second quarter.

Year-to-date, total annuity sales were $111.3 billion, according to LIMRA SRI, or 5% higher than sales results from the first half of 2017.

“Despite introducing of new products and making changes to enhance their existing products to make them more competitive, companies are not having the same success with VAs as they are with fixed annuities,” Giesing notes. “However, the new and enhanced VAs, combined with the vacated DOL rule and better economic conditions, have led to slightly improved sales.”

Other notable data points shared by LIMRA SRI show sales of fixed-rate deferred annuities benefited from higher interest rates, with sales ticking up 23% in the second quarter to $11.4 billion. Quarterly, sales have not been this high since the first quarter 2016.

“We believe fixed-rate deferred sales will have a strong second half of the year, based on the prospect of continued interest rate increases,” Giesing concludes. “LIMRA SRI predicts fixed-rate deferred annuity sales to increase 15% to 20% this year and as much as 25% in 2019.”

Additional findings and other LIMRA SRI research reports are available here.