IRI Issues Second-Quarter 2018 Annuity Sales Report

Posted on September 10, 2018

IRI Issues Second-Quarter 2018

Annuity Sales Report

Fixed Indexed Annuity Sales Jump, VA Ticks Up

WASHINGTON, D.C. – The Insured Retirement Institute (IRI) today announced final second-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 second quarter of 2018 totaled $56.0 billion, a 15.9 percent increase from sales of $48.3 billion during the first quarter of 2018, and a 12.3 percent increase over sales of $49.9 billion in the second quarter of 2017. On a year-to-date basis, total annuity sales were $104.3 billion, a 5.8% increase of 2017 Q2 year-to-date sales of $98.6 billion.

According to Beacon Research, fixed annuity sales during the second quarter of 2018 rose to $31.9 billion, a 25.4 percent increase over sales of $25.4 billion during the first quarter of 2018 and a 21.8 percent increase over sales of $26.2 billion during the second quarter of 2017. Variable annuity total sales were $24.1 billion in the second quarter of 2018, according to Morningstar. This was a 5.2 percent increase from sales of $22.9 billion in the prior quarter and a 1.8 percent increase over sales of $23.7 billion in the second quarter of 2017.

“IRI has remained confident that annuities sales would rebound due to pent up demand for these solutions, which can provide both guaranteed lifetime income and principal protection to retirees and those saving for retirement,” said IRI President and CEO Cathy Weatherford, “and we strongly believe sales will continue to rise as Americans take on every more responsibility for their own retirement security, and as demographic trends inexorably increase the number of Americans living in retirement.”

According to Beacon Research, fixed annuity sales strongly increased across all product types, with fixed indexed increasing sales by more than $3.0 billion in the second quarter and book value annuities rising over $2.0 billion, as compared to the first quarter of 2018. Fixed indexed annuity sales rose 20.8 percent to $17.7 billion from $14.6 billion in the first quarter of 2018, and 22.9 percent from second quarter 2017 sales of $14.4 billion. Book value and market value adjusted (MVA) annuities, combined sales of which were $11.3 billion, rose 35.7 percent relative to first quarter sales of $8.4 billion, and were also up 25.6 percent versus second quarter 2017 sales of $9.0 billion. Income annuity sales also rose, posting sales of $2.9 billion, an 18.1 percent increase over first quarter income annuity sales of $2.5 billion. For the entire fixed annuity market, there were approximately $17.7 billion in qualified sales and $14.2 billion in non-qualified sales during the second quarter of 2018.

“The fixed annuity market saw record percentage increases across the board in the second quarter,” said Beacon Research CEO Jeremy Alexander, “reflecting strong demand among advisors and consumers for safety and guaranteed income.”

Fixed Table 1. Quarterly Fixed Annuity Sales by Product Type (Quarter Ended)
($ Millions)  6/30/18 3/31/18 12/31/17 9/30/17 6/30/17
 Total Sales (Rounded)  31,902  25,432  23,657  22,584  26,195
 Book Value  7,044  5,015  4,649  4,445  5,733
 Market Value Adjust  4,294  3,338  2,548  2,681  3,294
 Indexed  17,651  14,612  13,810  12,991  14,359
 Income  2,914  2,468  2,650  2,468  2,810
Source: Beacon Research Fixed Annuity Premium Study

Fixed Table 2. Quarterly Market Share by Product Type
(As a percent of total sales) 6/30/18 
 Indexed  55.3%
 Book Value  22.1%
 Market Value Adjusted  13.5%
 Income  9.1%
Source: Beacon Research Fixed Annuity Premium Study

According to Morningstar, variable annuity net assets rose 0.7 percent to $1.97 trillion during the second quarter of 2018. On a year-over-year basis, assets fell 0.9 percent, from $1.99 trillion at the end of the second quarter of 2017, as increasingly negative net flows overcame positive market performance. Net flow in variable annuities were -$21.1 billion in the second quarter, up 14.6 percent from -$18.4 billion in the first quarter of 2018. Within the variable annuity market, there were $15.5 billion in qualified sales and $8.6 billion in non-qualified sales during the second quarter of 2018. Qualified sales rose 7.0 percent from first quarter sales of $14.5 billion, while sales of non-qualified variable annuities rose 2.2% from first quarter sales of $8.4 billion.

“While negative net flows continue to weigh on total net assets,” said Michael Manetta, Senior Quantitative Analyst at Morningstar, “it is encouraging to see a solid rebound in overall sales of variable annuities, indicating that distributors are normalizing operations in the wake of the DOL fiduciary rule being vacated.”

Variable Table 1. Variable Annuity Net Assets
($ Millions) 6/30/18  3/31/18  12/31/17  9/30/17  6/30/17 
 Total Net Assets  1,967,249  1,953,231  1,985,722  1,957,995  1,985,235
Source: Morningstar, Inc., and Insured Retirement Institute

Variable Table 2. Quarterly Variable Annuity Total Premium & Net Sales*
($ Millions) 6/30/18  3/31/18  12/31/17  9/30/17  6/30/17 
 Total Sales  24,102  22,904  23,909  20,932  23,680
 Net Sales*  -21,124  -18,441  -18,185  -15,858  -14,810
 Net Sales % of Total Sales**  -87.6%  -80.5%  -76.1%  -75.8%  -62.5%
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 Assets by Asset Class
(As a percent of total assets) 6/30/18 
 Equity  34.2%
 Allocation  38.6%
 Fixed Accounts  17.5%
 Bonds  8.6%
 Money Markets  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 June 30, 2018. 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 www.annuitymarketstudy.com. 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 www.annuitynexus.com 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 www.irionline.org.

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Contact: Dan Zielinski