IRI Issues First Quarter 2018 Annuity Sales Report

Fixed Annuities On The Rise 
IRI Issues First Quarter 2018 
Annuity Sales Report  

WASHINGTON, D.C. –The Insured Retirement Institute (IRI) today announced final first 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 first quarter of 2018 totaled $49.1 billion, a 1.2 percent increase over sales of $48.5 billion during the fourth quarter of 2017, and a 0.6% decrease from sales of $49.3 billion in the first quarter of 2017.

According to Beacon Research, fixed annuity sales during the first quarter were $26.2 billion, a 6.7 percent increase over fourth quarter 2017 sales of $24.6 billion and a 0.8 percent increase from sales of $26.0 billion during the first quarter of 2017. Variable annuity total sales were $22.9 billion in the first quarter of 2018, according to Morningstar. This was a 4.2 percent decrease from sales of $23.9 billion in the prior quarter, and a 1.7 percent decline from sales of $23.3 billion in the first quarter of 2017.

"It's encouraging to see annuity sales on the rise, despite recent regulatory challenges causing marketplace disruption," said IRI President and CEO Cathy Weatherford. "IRI research shows that American consumers planning for, and living in, retirement need and desire solutions that can provide them with income they cannot outlive, and that can help protect the financial assets they've worked so hard to build. The insured retirement industry continues to innovate and deliver the solutions that will help millions of Americans prepare for and enjoy a secure retirement, and rising sales reflect the success of those efforts."

According to Beacon Research, fixed indexed annuity sales also rose, by 4.6% relative to the fourth quarter of 2017, and by 12.3% over the first quarter of 2017. Overall, fixed annuity sales were comprised of approximately $15.1 billion in qualified sales and $11.1 billion in non-qualified sales during the first quarter of 2018.

"Fixed indexed sales came roaring back in the first quarter as market volatility picked up and consumers sought the relative safety and growth potential of fixed indexed annuities," said Beacon Research CEO Jeremy Alexander. "We are seeing both increased demand for principal guarantee fixed indexed products, and a rapidly developing market for structured annuities, where downside risk is shared by the consumer and insurer. We expect this market to continue to gain strength."

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

($ Millions) 3/31/18  12/31/17  9/30/17  6/30/17  3/31/17 
Total Sales (Rounded)   26,233   24,577   23,340  29,910  26,014
Book Value   5,015   4,649  4,445  5,733  5,913
Market Value Adjusted   3,338  2,548  2,681  3,294  3,847
Indexed   15,413   14,730  13,746  15,074  13,772
Income   2,468  2,650  2,468  2,810  2,535

Source: Beacon Research Fixed Annuity Premium Study

Fixed Table 2. Quarterly Market  Share by Product Type

(As a percent of total share)  3/31/18
 Indexed  58.7%
 Book Value  19.1%
 Market Value Adjusted  12.7%
 Income  9.5%
Source: Beacon Research Fixed Annuity Premium Study

According to Morningstar, variable annuity net assets fell 1.6 percent to $1.95 trillion during the first quarter of 2018, versus fourth quarter 2017 net assets of $1.99 trillion. On a year-over-year basis, assets rose 0.6 percent, from $1.94 trillion at the end of the first quarter of 2017. Net flows in variable annuities were -$18.4 billion in the first quarter. Within the variable annuity market, there were $14.5 billion in qualified sales and $8.4 billion in non-qualified sales during the first quarter of 2018, with both qualified and non-qualifies sales down versus the fourth quarter of 2017.
 
“Variable annuities continue to face challenges regaining their footing in the wake of transaction processing disruptions born of the past few years’ efforts to comply with the now vacated DOL fiduciary rule, coupled with increased market volatility and negative net flows putting pressure on asset values,” said John McCarthy, Senior Product Manager at Morningstar. “However, we expect sales to recover as business processes normalize and sales increase in newer product types, such as structured and fee-based annuities.”

Variable Table 1. Variable Annuity Net Assets

($ Millions)   3/31/18  12/31/17  9/30/17  6/30/17  3/31/17
 Total Net Assets  1,953,231  1,985,722  1,957,995  1,976,235  1,941,226

Source: Morningstar, Inc. and Insured Retirement Institute

Variable Table 3. Quarterly Variable Annuity Total Premium & Net Sales*
Quarter Ended

($Millions)  3/31/18  12/31/17  9/30/17  6/30/17  3/31/17
 Total Sales  22,904  23,909  20,932  23,680  23,294
 Net Sales**  -18,441  -18,185  -15,858  -14,810  -17,803
 Net Sales as % of Total Sales   -80.5%  -76.1%   -75.8%  -62.5  76.2%

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)  3/31/18
 Equity  33.9%
 Allocation  38.8%
 Fixed Accounts  17.4%
 Bonds  8.7%
 Money Market  1.2%
Source: Morningstar, Inc.

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Contact: John B Jennings