LIMRA Secure Retirement Institute: First Quarter 2017 Annuity Sales Decline

WINDSOR, Conn., May 18, 2017 – U.S. annuity sales were $52.0 billion, a slight uptick from fourth quarter, but a 12 percent decline from the first quarter 2016, according to LIMRA Secure Retirement Institute’s First Quarter 2017 U.S. Retail Annuity Sales Survey. This is the fourth consecutive quarter of decline in overall annuity sales.

“Despite an improvement in the equities market and interest rate environment, uncertainty around the DOL rule overwhelmed any impact it may have had on annuity sales,” noted Todd Giesing, assistant research director, LIMRA Secure Retirement Institute.

In the first quarter, variable annuity (VA) sales totaled $24.4 billion, down eight percent. There has only been one quarter of growth when compared to prior years since 2012.

“While we believe the DOL is playing a significant role in the declining VA sales, this downward sales trend began before the DOL announced their rule,” said Giesing. “Sales with a guaranteed living benefit (GLB) continued to decline at a much faster rate than products without. In fact, where we are seeing growth is in the structured VA market. In the first quarter, structured VAs grew 60 percent compared to first quarter 2016. This segment represents about 5-10 percent of the total VA market.”

The Institute is forecasting VA sales will drop 10-15 percent in 2017 totaling less than $100, which hasn’t happened since 1998.

In the first quarter, sales of fixed annuities fell 15 percent, totaling $27.6 billion. All fixed product lines sales experienced declines.

“Despite the decline in first quarter fixed annuity sales, this is the fifth consecutive quarter fixed sales outperformed variable sales,” said Giesing. “The last time this happened was nearly 25 years ago.”

Indexed annuity sales fell 13 percent to $13.6 billion. Much of this decline can be attributed to a drop in sales by the top two carriers. Seven of the top 10 indexed annuity writers also reported declined in the first quarter. Sales of indexed annuities with GLB’s dropped off significantly in the first quarter, to the point where more indexed annuity sales were without a GLB than with one.

“While we typically see a seasonal decline in the first quarter, we suspect there are some companies re-evaluating their product mix in anticipation of the DOL rule,” added Giesing. “Unless there is a change in the DOL fiduciary rule rollout, we are anticipating indexed sales in 2017 to decline for the first time in a decade.”

The Institute is forecasting indexed annuity sales will drop 5-10 percent in 2017 and another 15-20 percent in 2018 when the BICE goes into effect.

Sales of fixed-rate deferred annuities, (Book Value and MVA) fell 16 percent in the first quarter to $10.1 billion. Excluding 2016, first quarter 2017 results were better than sales in first quarter each year since 2009. First quarter 2016 was an atypical quarter in which a large block of business came to term with a sizable amount reinvested in the new fixed annuity products.

Overall the Institute forecasts fixed-rate deferred products to grow as much as 5 percent in 2017, and closer to 15-20 percent in 2018.

Income annuities had a tough quarter despite steady interest rates, as flexibility features in deferred annuities are trumping the higher payouts typically seen in income annuities First quarter single premium immediate annuity (SPIA) sales were $2.0 billion, down 20 percent when compared to the same quarter last year. Deferred income annuity (DIA) sales also fell. They were down 26 percent in the first quarter, to $545 million. The Institute projects income annuity sales to drop 5-10 percent in 2017, but rebound 10-15 percent in 2018.

The Institute expects overall sales in 2017 to fall below $200 billion, about a 5-10 perfect decline, which will be the lowest annuity sales have been since 2001.

The first quarter 2017 Annuities Industry Estimates can be found in the updated Fact Tank. To view variable, fixed and total annuity sales over the past 10 years, please visit Annuity Sales 2007-2016. To view the top twenty rankings of total, variable and fixed annuity writers for first quarter 2017, please visit First Quarter 2017 Annuity Rankings. To view the top twenty rankings of only fixed annuity writers for first quarter 2017, please visit First Quarter 2017 Fixed Annuity Rankings. LIMRA Secure Retirement Institute's First Quarter U.S. Individual Annuities Sales Survey represents data from 96 percent of the market.

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