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Broker dealers pivot quickly to protection-based solutions

WINDSOR, Conn., Aug. 18, 2020—Total annuity sales were $48.6 billion in the second quarter, down 24% from second quarter 2019, according to final results from the Secure Retirement Institute^® (SRI^®) U.S. Individual Annuity Sales Survey.

“The global pandemic presented unique challenges to annuity distribution in the second quarter. Aside from the economic impact, social distancing disrupted business operations for companies and advisors over the past three months,” said Todd Giesing, senior annuity research director, SRI. “The focus this quarter was on protection-based solutions as equity market volatility had investors seeking safety.”  

Protection was the theme of the second quarter
Fixed-rate deferred annuity sales were $12.8 billion, down 2% from prior year. However, fixed-rate deferred sales jumped 31% compared with first quarter 2020 results, despite the rapid declines in interest rates year-to-date, fixed-rate deferred annuity sales totaled $22.6 billion, which is 20% lower than prior year results. 

“While low interest rates dampened fixed-rate deferred annuity crediting rates, sales climbed from the first quarter as investors pursued short-term safety,” said Giesing. “We did see a significant shift in distribution in the second quarter, as the broker dealer channels drove fixed-rate deferred sales growth.”     

Fixed-rate deferred annuity market share for broker dealers¹ reached 50% in the second quarter, up 11 percentage points from 39% in the first quarter. Last year, broker dealer channels only accounted for 29% of overall fixed-rate deferred sales. “This shift suggests Americans continue to be concerned about the economic impact of the pandemic and are seeking short-term solutions to preserve and protect their savings,” Giesing noted.

In the first six months of 2020, total annuity sales were $104.4 billion, 16% lower than prior year.

Registered index-linked annuities (RILAs) were the only major product line to record positive growth in the second quarter. RILA sales were $4.5 billion in the second quarter, 8% higher than in second quarter 2019. This marks the 22^nd consecutive quarter over quarter growth for RILA sales. Year-to-date, RILA sales were $9.4 billion, up 22% from the first half of 2019. 

“Bank sales of RILAs dropped 15% in the second quarter while independent and full-service national broker dealers’ sales increased 7% each and represented more than half of the RILA sales for the quarter,” said Giesing. “Banks traditionally have a more conservative client base, which had them gravitate to other protection-based products in response to the unfavorable economic conditions.”

Despite the growth in RILA sales, total variable annuity (VA) sales dropped 19% in the second quarter to $20.8 billion, representing the lowest quarterly VA sales since 1996. VA sales were $46.8 billion in the first half of 2020, down 4% from the first half of 2019.

Total fixed annuity sales were $27.8 billion, down 27% from prior year, driven by a significant drop in fixed indexed annuity (FIA) sales. Year-to-date, fixed annuities totaled $57.6 billion, 24% lower than the first half of 2019.

FIA sales fell 40% to $12 billion in the second quarter, representing the lowest quarterly total for FIAs since first quarter 2015. FIA sales declined 26% in the first half of 2020 to $28.2 billion.

“In this continued ultra-low interest rate environment, accumulation-focused FIAs without guaranteed lifetime benefit riders (GLB) experienced a significant decline in the second quarter, down 42% compared with prior year,” noted Giesing. “FIA manufacturers continue to lower crediting rates, making other protection-based solutions, such as fixed-rated deferred and RILAs, more attractive.”

Low interest rates continue to inhibit income annuity sales. Single premium immediate annuities (SPIAs) were $1.4 billion in the second quarter, 48% below results in the second quarter of 2019. This is the lowest quarterly level of SPIA sales in 13 years. Year-to-date, SPIA sales were $3.3 billion, down 40% compared with sales results from the first six months of 2019.

Deferred income annuity (DIA) sales were $353 million in the second quarter, less than half of sales recorded in the second quarter of 2019. Year-to-date, DIA sales were $823 million, 39% lower than prior year results.

Second quarter 2020 annuities industry estimates represent 95% of the total market. A summary of the results can be found in LIMRA’s Fact Tank.

To view the top 20 rankings of total, variable and fixed annuity writers for the second quarter 2020, please visit Second Quarter 2020 Annuity Rankings. To view the top 20 rankings of only fixed annuity writers for the second quarter 2020, please visit Second Quarter 2020 Fixed Annuity Rankings

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About Secure Retirement Institute^® 
The Secure Retirement Institute^® (SRI^®) provides comprehensive, unbiased research and education about all aspects of the retirement industry to improve retirement readiness and promote retirement security. For information on the Secure Retirement Institute, visit: www.limra.com/sri.

¹Includes independent and full service national BD channels combined
²Includes bank, career agent, direct, & independent agents combined