IRI Issues Fourth Quarter 2017 Annuity Sales Report

Posted on April 17, 2018

IRI Issues Fourth Quarter 2017 Annuity Sales Report

Variable and Fixed Indexed Annuities Finish Strong

WASHINGTON, D.C. – The Insured Retirement Institute (IRI) today announced final fourth quarter sales results for the U.S. annuity industry, based on data reported by Beacon Research and Morningstar, Inc. Industry-wide annuity sales in the fourth quarter of 2017 totaled $48.4 billion, a 9.5 percent increase over sales of $44.2 billion during the third quarter of 2017, and a 0.3% increase from sales of $48.2 billion in the fourth quarter of 2016. For the full year, fixed and variable annuity sales totaled $192.1 billion, down 9.1 percent from 2016 total sales of $211.4 billion.

According to Beacon Research, fixed annuity sales during the fourth quarter of were $24.5 billion, a 5.2 percent increase over third quarter sales of $23.2 billion and a 2.7 percent increase from sales of $23.8 billion during the fourth quarter of 2016. Variable annuity total sales were $23.9 billion in the fourth quarter of 2017, according to Morningstar. This was a 14.2 percent increase from sales of $20.9 billion in the prior quarter, and a 2 percent decline from sales of $24.4 billion in the fourth quarter of 2016.

“Variable and fixed indexed annuities rebounded strongly in the fourth quarter, with variable hitting their high-water mark for the year, as insurers and distributors began to adapt to the changes in transaction processing necessitated by the implemented and pending requirements of the DOL fiduciary rule,” said IRI President and CEO Cathy Weatherford. “Sales increasing at a brisk pace in variable and fixed indexed annuities is evidence of the demand that continues to grow among Americans retiring and preparing for retirement, despite the challenges presented by the regulatory environment. With the DOL fiduciary rule now vacated by the 5th Circuit Court of Appeals, we expect sales to continue building on these increases in 2018 as transaction friction abates.”

According to Beacon Research, while sales of all fixed annuities fell in the third quarter, fixed indexed sales saw the lowest drop in sales, falling 9.2 percent to $13.6 billion from second quarter sales of $14.9 billion and comprising 59.6 percent of total fixed annuity. For the entire fixed annuity market, there were approximately $12.7 billion in qualified sales and $10.0 billion in non-qualified sales during the third quarter of 2017.

“We continue to be impressed by the strength of the fixed annuity market,” said Beacon Research CEO Jeremy Alexander. “Driven in part by increased regulatory pressures, we have seen strong growth into the broker-dealer channels. In 2010 9% of fixed sales occurred in wirehouses, large/regional broker dealers and independent broker-dealers, as of Q4, 2017 that number is 26%. In addition, fixed indexed annuities now make up almost 60% of all fixed annuity sales, up from 50% just five years ago.”

Fixed Table 1. Quarterly Fixed Annuity Sales by Product Type
Quarter Ended

 ($ Millions)  12/31/17   9/30/17   6/30/17   3/31/17   12/31/16 
 Total Sales (Rounded)   24,452   23,238   26,765   25,866   23,807 
 Book Value   4,649  4,445  5,733  5,913  4,366
 Market Value Adjusted  2,548  2,681  3,294  3,847  2,995
 Indexed  14,605  13,644  14,929  13,574  13,921
 Income  2,650  2,320  2,810  2,532  2,525
Source: Beacon Research Fixed Annuity Premium Study

Fixed Table 2. Quarterly Market Share by Product Type
 (As a percent of total sales)  12/31/17
 Indexed  59.7%
 Book Value  19.0%
 Market Value Adjusted  10.4%
 Income  10.8%
Source: Beacon Research Fixed Annuity Premium Study

According to Morningstar, variable annuity net assets rose 1.4 percent to $1.99 trillion during the fourth quarter of 2017, versus third quarter net assets of $1.96 trillion. On a year-over-year basis, assets were up 4.7 percent, from $1.90 trillion at the end of the fourth quarter of 2016, as positive market performance continued to outweigh the impact of negative net flows. Net flow in variable annuities were -$18.2 billion in the fourth quarter. Within the variable annuity market, there were $15.2 billion in qualified sales and $8.7 billion in non-qualified sales during the fourth quarter of 2017. Qualified sales rose 15 percent from third quarter qualified sales of $13.2 billion, while sales of non-qualified variable annuities increased by 12.6 percent from third quarter non-qualified sales of $7.8 billion.

“Variable annuity sales were hit hard in 2017, with disruptions in business processes and uncertainty fueled by the protracted introduction and ambiguity surrounding the DOL fiduciary rule making it more difficult to transact,” said John McCarthy, Senior Product Manager at Morningstar. “Yet positive investment returns kept VA assets under management at near-record levels. With the DOL rule now vacated, the industry moves back to more familiar territory when it comes to suitability, and we expect business to start to normalize during the remainder of 2018.”

Variable Table 1. Variable Annuity Net Assets

($ Millions)  12/31/17  9/30/17  6/30/17  3/31/17  12/31/16
 Total Net Assets   1,985,722  1,957,995  1,976,235  1,941,226  1,896,741
Source: Morningstar, Inc., and Insured Retirement Institute

Variable Table 2. Quarterly Variable Annuity Total Premium & Net Sales*
Quarter Ended
($ Millions)  12/31/17  9/30/17  6/30/17  3/31/17  12/31/16
 Total Sales  23,909  20,932  23,680  23,299  24,413
 Net Sales**  -18,185  -15,858  -14,810  -17,803  -4,525
 Net Sales as % of total sales  -76.1%  -75.8%  -62.5%   -76.4%  -18.5%
Source: Morningstar, Inc.
*Total Premium Sales, also called Total Premium Flows, represents the sum of new sales [all first-time buyers of a contract, including inter- and intra-company exchanges] and additional premiums from existing contract owners.  Net Sales, also called Net Flows, represents Total Premium Sales minus surrenders, withdrawals, inter- and intra-company exchanges, and benefit payments.

**Morningstar estimates net sales based on a calculation methodology used across all investment universes for which Morningstar collects and publishes asset and performance data, including global open end mutual funds, separate accounts, and exchange traded funds.

Variable Table 3. Variable Annuity by Asset Class

(As a % of total assets)   12/31/17
 Equity  34.0%
 Allocation  39.1%
 Fixed Accounts  17.2%
 Bonds  8.6%
 Money Market  1.1%

Source: Morningstar, Inc.


About Morningstar, Inc.: Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for individual investors, financial advisors, asset managers, retirement plan providers and sponsors, and institutional investors in the private capital markets. Morningstar provides data and research insights on a wide range of investment offerings, including managed investment products, publicly listed companies, private capital markets, and real-time global market data. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $200 billion in assets under advisement and management as of December 31, 2017. The company has operations in 27 countries.

About Beacon Research: Beacon Research is an independent research company and application service provider founded in 1997 and based in Northfield, Ill. Beacon tracks fixed and variable annuity features, rates and sales. Its quarterly Fixed Annuity Premium Study is the first and only source to analyze fixed annuity sales at the product level, and the first to make a decade’s worth of sales information available to subscribers online at Beacon lowers compliance risk and increases fixed annuity sales with 100% carrier-approved, comprehensive product profiles, spreadsheets and search tools for the advisor/rep websites of banks, TPMs, broker-dealers and marketing organizations. Carriers and financial institutions use its systems at for compliance review of 1035 exchanges, sales support, conservation and product research. Beacon also licenses information to other platforms. Directly and through licensees, Beacon information can be accessed by hundreds of financial institutions and thousands of advisors.

About the Insured Retirement Institute: The Insured Retirement Institute (IRI) is the leading association for the retirement income industry. IRI proudly leads a national consumer coalition of 40 organizations, and is the only association that represents the entire supply chain of insured retirement strategies. IRI members are the major insurers, asset managers, broker-dealers/distributors, and 150,000 financial professionals. As a not-for-profit organization, IRI provides an objective forum for communication and education, and advocates for the sustainable retirement solutions Americans need to help achieve a secure and dignified retirement. Learn more at

Contact: John B Jennings