IRI ISSUES THIRD QUARTER 2019 ANNUITY SALES REPORT

Posted on December 11, 2019

Fixed Annuity Sales Moderate as Variable Annuities Hold Steady

WASHINGTON, D.C. – Annuity sales fell in the third quarter of 2019, decreasing 8.4 percent as the combined sales of fixed and variable annuities totaled $55.7 billion as compared to sales of $60.8 billion in the second quarter of 2019, according to the Insured Retirement Institute (IRI), which today announced final third quarter 2019 market data for the U.S. annuity industry based on data reported by Beacon Annuity Solutions and Morningstar, Inc.

Sales were on par with year ago levels, down just 0.4 percent from total annuity sales of $55.9 billion in the third quarter of 2018. Total annuity sales on a year-to-date basis totaled $174.3 billion, up 7.5 percent versus third quarter 2018 year-to-date sales of $162.2 billion.

Total annuity sales

  • $55.7 billion - industry-wide annuity sales in the third quarter of 2019
    • 8.4 percent decrease from sales of $60.8 billion in the second quarter of 2019
    • 0.4 percent lower than third quarter 2018 sales of $55.9 billion
  • $174.3 billion - industry-wide annuity sales in the year-to-date period ending September 30, 2019
    • 7.5 increase from total annuity sales of $162.2 billion in the year-to-date period ending September 30, 2018

Fixed Annuity Sales

  • $30.1 billion – 2019 third quarter fixed annuity sales
    • 16 percent decrease from second quarter sales of $35.8 billion
    • 5.5 percent lower than 2018 third quarter sales of $31.8 billion
  • $101.8 billion – fixed annuity sales in the year-to-date period ending September 30, 2019
    • 14.1 percent increase over sales of $89.2 billion in the year-to-date period ending September 30, 2018

Variable annuity sales[i]

  • $25.6 billion – 2019 third quarter variable annuity sales
    • Up 2.4 percent versus 2019 second quarter sales of $25.0 billion
    • 6.2 percent higher 2018 third quarter VA sales of $24.1 billion
  • $72.5 billion – variable annuity sales in the year-to-date period ending September 30, 2019
    • Down 0.7 percent versus 2018 sales of $73.0 billion in the year-to-date period ending September 30, 2018

“Demographics continue to favor growth in the use of annuities for guaranteed lifetime income and protection against market downturns,” said IRI President and CEO Wayne Chopus. “We remain optimistic for growth in 2020 and beyond.”

According to Beacon Annuity Solutions, fixed annuity sales are off recent highs, but fixed indexed and market-value adjusted annuities are higher than in the same period last year.

  • $18.2 billion – fixed indexed annuity sales fell from second quarter 2019 levels
    • 9.0 percent decrease versus second quarter 2019 sales of $20.0 billion
    • percent higher than 2018 third quarter sales of $18.0 billion
  • $4.1 billion - Book value annuity sales
    • Book value sales fell 43.3 percent versus $7.2 billion in the second quarter of 2019
    • 2019 third quarter sales were 41.0 percent lower than 2018 third quarter sales of $7.0 billion
  • $5.0 billion - Market value adjusted (MVA) annuity sales
    • Third quarter MVA sales were down 3.8 percent from 2019 second quarter sales of $5.2 billion
    • MVA sales increased 22.0 percent versus third quarter 2018 sales of $4.1 billion
  • $2.7 billion - Income annuity sales
    • Income annuity sales were down 18.1 percent from second quarter sales of $3.3 billion
    • Sales were flat versus third quarter 2018 sales of $2.7 billion

For the entire fixed annuity market, there were approximately $17.4 billion in qualified sales and $12.7 billion in non-qualified sales during the third quarter of 2019.

“The inverted yield curve, along with declining corporate bond yields, continued to apply downward pressure on overall third quarter fixed annuity sales.  In addition, fixed indexed annuities suffered from higher hedging costs due to market volatility,” said Beacon Annuity Solutions CEO Jeremy Alexander. “We anticipate next quarter sales to be flat with an upward bias given the steepening yield curve, as well as rising corporate bond rates and lower market volatility.”

According to Morningstar, variable annuity net assets fell in the third quarter on lower investment returns and negative net asset flows.

  • $1.95 trillion – Variable annuity assets fell 0.5 percent from $1.96 trillion in the second quarter of 2019.
    • Allocation funds held $796.8 billion in VA assets, or 40.9 percent of the total, falling below the $800 million mark.
    • Equity funds held $597.0 billion, or 30.7 percent of total VA assets.
    • Fixed accounts held $351.2 billion, or 18.0 percent of VA assets.

Net asset flows in variable annuities were -$21.4 billion in the third quarter, up from -$20.4 in the second quarter but an improvement over outflows of $24.8 billion in the first quarter. Within the variable annuity market, there were $16.7 billion in qualified sales and $8.9 billion in non-qualified sales during the third quarter of 2019.

“Structured annuities continued to gain market share in the VA space,” said Michael Manetta, Senior Quantitative Analyst at Morningstar. “With more than a decade having passed since a significant stock market correction, this growth likely reflects investor interest in products that offer some form of downside protection to the account value.”

 

# # #

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 September 30, 2019. The company has operations in 27 countries.

About Beacon Annuity Solutions: Beacon Annuity Solutions 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 over 15 years 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 is accessible to 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 f 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.



[i] Both Morningstar and Beacon report sales for certain structured annuities filed with the SEC. In order to avoid confusion between fixed and variable and eliminate overstatement, sales data for these products is consolidated within the VA universe, resulting in sales totals that are slightly higher than sales reported by Morningstar, Inc. and slightly lower than sales reported by Beacon.