Annuity sales are down industrywide.
First quarter annuity sales slumped to $52.7 billion, down 6.9% from the previous quarter and 6% from the first quarter of 2014, according to data from Beacon Research and Morningstar.
"Interest rates were down sharply in January, and with a strong consensus across the market that rates will reverse course this year, it is logical to conclude that some consumers decided to defer their purchases," Cathy Weatherford, Insured Retirement Institute president and CEO, said in a statement releasing the data.
When rates rebound, she said, she expects sales to pick up.
Overall, fixed annuity sales fell to $20.9 billion in the first quarter, a 9.5% decline from $23 billion in the previous quarter and a 7.5% decline compared to the year-ago period. Though quarterly fixed annuity sales were down from a five-year high set in 2014, they were up nearly 40% over where they were two years ago.
Despite the slowdown in fixed annuity sales this year, fixed-indexed annuity sales remained robust during the quarter, hitting a record share -- 55.6% -- of the total fixed annuity market, the Beacon Research shows. Fixed-indexed annuity sales bumped up to $11.6 billion in the first quarter, a 3.1% increase over $11.2 billion in the first quarter of 2014.
In particular, "[Non-market-value-adjusted] products climbed in the captive and wirehouse channels, up 25.3% and 4.5% respectfully, to their highest levels since Q4 2011," said Jeremy Alexander, president of Beacon Research. "Fixed indexed products also set a new record in the wirehouse channel with a 14.5% increase."
Meanwhile, total variable annuity sales were down. Sales of those products fell 5.1%, slipping to $31.8 billion from $33.6 billion in the previous quarter, and 5% since the first quarter of 2014. Though sales were down, variable annuity net assets increased in the first quarter. Net assets posted a 1.4% increase to $1.95 trillion in the first quarter -- a 3.4% jump from $1.88 trillion at the end of the year-ago quarter.
Variable annuity net sales -- the total sales minus surrenders, withdrawals, contract exchanges and benefit payments -- were negative for the first quarter, estimated to be $3.5 billion, according to Morningstar.
"New sales continue to flow into VAs, though at a slower clip than last year," said John McCarthy, senior product manager for annuity products at Morningstar. "Investors are showing their preference for more aggressive investment options inside variable annuities, which may indicate a loosening of the risk aversion we've seen in the recent past."
Rajashree Chakravarty is an intern for SourceMedia's Investment Advisor Group.
Register or login for access to this item and much more
All Bank Investment Consultant content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access