Fixed Annuity Sales Jumped in First Quarter

Sales of fixed annuities increased 38% during the first quarter of 2019 relative to the same period last year, according to the LIMRA Secure Retirement Institute.

First quarter 2019 fixed annuity sales were $38 billion, a 38% increase compared with first quarter 2018, according to LIMRA Secure Retirement Institute (LIMRA SRI).

The First Quarter 2019 U.S. Retail Annuity Sales Survey shows fixed annuity sales have outperformed variable annuity sales in 11 of the last 13 quarters. Overall, according to the survey report, U.S. annuity sales were $60.8 billion. This is an increase of 17% from the first quarter 2018 results.

Todd Giesing, annuity research director, points out that this is the highest first quarter for total annuity sales going back a decade.

“This is the strongest start for fixed annuities ever,” he said. “The uptick in fixed annuity sales continued the momentum fixed annuities experienced in 2018, and was bolstered by recent volatile equity markets, which had investors seeking solutions with guarantees.”

Giesing suggests the significant turbulence in the equity markets experienced in the fourth quarter of 2018 “really sparked a flight to safety.”

“This resulted the highest level of first quarter sales for indexed annuities we have ever seen, and the highest level of fixed rate deferred sales since 2009,” Giesing said.

According to LIMRA SRI’s data, single premium immediate annuity (SPIA) sales had a record first quarter in 2019, up 33% to $2.8 billion, compared with prior year results. Deferred income annuity (DIA) sales increased 23% in the first quarter 2019 to $633 million.

The LIMRA SRI data shows a different story for variable annuity (VA) sales, which totaled $22.8 billion, down 7% from the prior year.

“The steep market declines from fourth quarter last year have impacted VA sales this quarter,” Giesing said. “While we did see low sales in January and February, March sales were a bit stronger, indicating we will likely see better results in the second quarter. Despite the expectations of improvement, VAs have an uphill climb.”

In a recent conversation with PLANADVISER, Sri Reddy, senior vice president in retirement and income solutions for Principal Financial Group, suggested the conversation around retirement income is quickly shifting in the United States. This is driving more investors to consider how annuities can fit into their retirement portfolio.

“At our recent adviser conference, we featured a researcher who talked about how the 4% rule is outdated,” Reddy said. “Advisers really responded to this idea that the retirement income conversation is changing. If you talk to most leading academics, they don’t debate that annuities can be helpful. They debate when to annuitize, what types of annuities to use, and how much of the wealth to annuitize.”

Reddy encouraged advisers to learn more about the numerous ways that different annuities can complement a client’s unique needs, and to bring this conversation directly to clients. In particular, he encouraged advisers to consider how annuitizing a part of a client’s wealth could free that client up to take greater risk in the equity markets—given that the spending needs are already taken care of. Over the span of a typical retirement, Reddy said, this strategy can actually deliver greater ending wealth.