US Annuity Sales Rise in Q2, But Still Down Nearly 10% from 2016

Non-qualified sales buoyed variable annuity market, IRI reports.

The Insured Retirement Institute (IRI), a financial services trade association, reported that the US annuity industry totaled $50.4 billion in sales for the second quarter, up 2.4% from $49.2 billion the previous quarter, but down 9.8% from $55.9 billion in the same period last year.

Fixed annuity sales during the second quarter rose 3.1% to $26.7 billion from the $25.9 billion reported in the first quarter, but were down 9.5% from $29.5 billion in sales for the second quarter of 2016. Meanwhile, variable annuity total sales increased 1.7% to $23.7 billion in the second quarter from $23.3 billion in the previous quarter, but fell 10.2% from sales of $26.4 billion in the second quarter of 2016. The figures from the IRI are based on data reported by Beacon Research and Morningstar, Inc.

It is “encouraging to see growth in industry-wide sales of annuities,” said Cathy Weatherford, president and CEO of IRI, in a statement. “IRI believes annuity sales will continue to increase as thousands of Americans enter retirement each day.”

According to Beacon Research, the quarterly increase in total fixed annuity sales was led by sales of fixed indexed products. Fixed indexed annuity sales climbed 10% to $14.9 billion from $13.6 billion in the first quarter, although sales were down 7.1% from the second quarter of 2016, when $16.1 billion in sales were reported. Overall fixed annuity sales also increased 11% from the previous quarter to $2.8 billion on strong sales of income annuities.

Book value and market value adjusted annuities had combined sales of $9 billion, which was down 7.7% from $9.8 billion during the first quarter, and 8.9% below sales of $9.9 billion for the year-ago quarter. For the entire fixed annuity market, there were approximately $15.1 billion in qualified sales, and $11.6 billion in non-qualified sales during the second quarter.

Variable annuity net assets increased 1.8% to $1.98 trillion during the second quarter, which was 5.1% higher than the same period last year, as positive market performance continued to overcome the impact of lower sales and negative net flows, according to Morningstar. Net flows in variable annuities were negative $14.8 billion in the second quarter.

Within the variable annuity market, there were $15.3 billion in qualified sales and $8.4 billion in non-qualified sales during Q2. Qualified sales dropped 1.8% from Q1 sales of $15.6 billion, while sales of non-qualified variable annuities gained 8.6% from Q1 sales of $7.7 billion.

“While total variable annuity sales rose slightly, the largest increases were in non-qualified sales,” said John McCarthy, senior product manager at Morningstar. “We are also seeing growth in newer investment-oriented products such as structured annuities.”

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