IRI Issues Fourth-Quarter and Full-Year 2015 Annuity Sales Report
Fixed Indexed Annuity Sales Soar, Post Banner Year
WASHINGTON, D.C. – The Insured Retirement Institute (IRI) today announced final fourth-quarter and full-year 2015 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 2015 reached $59.1 billion, a 1 percent increase from $58.5 billion during the third quarter of 2015, and a 4.4 percent increase from $56.6 billion in the fourth quarter of 2014. For the full year, industry-wide sales reached $228.8 billion in 2015, nearly unchanged from $229.4 billion in 2014 and a 3.6 percent increase from $220.9 billion in 2013.
Fixed annuity sales during the fourth quarter of 2015 reached their highest mark since the first quarter of 2009. According to Beacon Research, fixed annuity sales during the fourth quarter were $28.2 billion, a 6.6 percent increase from $26.5 billion during the third quarter of 2015 and a 22.5 percent increase from $23 billion in the fourth quarter of 2014. For full-year 2015, fixed annuity sales reached $98.4 billion. This was a 7.5 percent increase from sales of $91.5 billion in 2014.
Variable annuity total sales decreased to $30.9 billion in the fourth quarter of 2015, according to Morningstar. This was a 3.6 percent decline from $32 billion in the third quarter of 2015 and an 8 percent decline from $33.6 billion in the fourth quarter of 2014. For full-year 2015, variable annuity total sales were $130.4 billion, a 5.5 decline from $137.9 billion in 2014.
“The fourth quarter witnessed record sales of income annuities and fixed indexed annuities, which continue to push new highs,” IRI President and CEO Cathy Weatherford said. “Continued innovation is helping to spur the rapid sales growth of fixed indexed annuities. This includes the development of products with guaranteed lifetime income benefits as well as the introduction of products designed for the broker-dealer channel.”
According to Beacon Research, strong quarterly sales were largely supported by record sales of fixed indexed annuities. Fixed indexed annuity sales soared to a new high of $16.1 billion in the fourth quarter of 2015, an 11.9 percent increase from sales of $14.4 billion in the prior quarter and a 32.2 percent increase from sales of $12.2 billion in the fourth quarter of 2014. Income annuity sales also posted a new record in the fourth quarter, reaching $3.7 billion. This is a 15.8 percent increase from sales of $3.2 billion in the third quarter of 2015 and a 13.7 percent increase from sales of $3.3 billion in the fourth quarter of 2014. For the entire fixed annuity market, there were approximately $16.4 billion in qualified sales and $11.9 billion in non-qualified sales during the fourth quarter of 2015.
For the full-year 2015, fixed annuity sales posted their strongest year since 2009. Again, this growth is largely attributed to the record growth in sales of fixed indexed annuities, which reached $54.6 billion in 2015. This is a 13.9 percent increase from sales of $48 billion in 2014. For the full year, there were approximately $55.1 billion in qualified sales and $43.3 billion in non-qualified sales of fixed annuities.
“On a quarterly basis, fixed indexed and fixed income annuities hit new historical highs in Q4 2015, lifted by widening credit spreads, which allowed annuity manufacturers to offer more competitive credited rates and caps to policyholders,” Beacon Research President Jeremy Alexander said. “Fixed sales ended 2015 up 7.9 percent, the third annual increase, and are up $31.6 billion since 2012. On an annual basis fixed indexed and MVA sales led the way with 14 percent and 13 percent increases, respectively, from 2014 to 2015. In addition, since 2011, overall fixed and fixed indexed sales in particular have grown substantially. This growth occurred during a time when the 10-year Treasury never rose above 3 percent and the S&P 500 rose more than 65 percent.”
[Click here to access complete fixed annuity sales data in the PDF version of this release.]
According to Morningstar, variable annuity net assets increased in the fourth quarter of 2015, finishing the year at $1.87 trillion. This represents a 1.7 percent increase from the end of the third quarter when net assets totaled $1.84 trillion, but a 2.5 percent decline from the end of 2014 when net assets totaled $1.92 trillion. Within the variable annuity market, there were $20.8 billion in qualified sales and $10.1 billion in non-qualified sales during the fourth quarter of 2015. For the full year, there were $86.1 billion in qualified sales and $44.3 billion in non-qualified sales of variable annuities.
“2015 variable annuity sales lagged 2014 by 5.5 percent to end at $130.4 billion, the lowest annual sales since 2009,” said John McCarthy, Senior Product Manager, Annuity Products, for Morningstar. “We believe some of the drop is due to a reduction in product exchanges, as guaranteed lifetime income benefits keep assets in place. While still negative at $5.2 billion, net flows recovered from an all-time low of negative $7.1 billion in the third quarter. This improvement supports our view that a higher percentage of new sales represents new money rather than product exchanges, despite outflows caused by benefit payments and aging group business.”
[Click here to access complete variable annuity sales data in the PDF version of this release.]
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, and retirement plan providers and sponsors. Morningstar provides data on more than 510,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 17 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement and management as of Dec. 31, 2015. 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 more than 30 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.