Indexed annuity sales, according to a LIMRA report released today, had a record-breaking third quarter, hitting $14.3 billion, up 22 percent and 10 percent higher than the previous best quarterly results.
In all, U.S. annuity sales topped $60 billion improving 4 percent compared with the prior year.
"Despite high volatility, a significant market correction and lower interest rates, total annuity sales — driven by substantially strong fixed-rate deferred and indexed annuity results — recorded positive growth in the third quarter," said Todd Giesing, assistant research director, LIMRA Secure Retirement Research. "There was definitely a flight to safety with every fixed product except fixed immediate and structured settlement annuities recording positive growth."
Variable annuities again dragged down total annuity sales, which hit $175.3 billion, 2 percent lower than a year ago. Market volatility rocked VA sales as the product sales fell 7 percent to $32.9 billion. On the year, VA sales are off 4 percent to $101.3 billion.
The news gets a bit worse for VAs as 19 of the 20 top VA writers reported declines.
"There has been a significant shift in VA market share over the past several years," said Giesing. "Today, VA sales make up 54 percent of the overall annuity business, down from 67 percent just in 2012. This decline in VA market share has certainly contributed to the growth in the indexed annuity market."
Fixed annuities also benefited from a risk-averse public. Sales of fixed annuities increased 21 percent in the quarter, to $27.7 billion.
"Despite the decline in rates, fixed annuity writers have been able to offer competitive rates. Coupled with the equity market volatility, we believe the safety of fixed products is being seen as a safe haven," said Giesing.
According to the report, one distribution channel has outstripped the others. "While all channels are seeing growth in indexed annuity market, the bank channel has experienced remarkable growth. Bank sales of indexed annuities now represents 18 percent of sales, up from 6 percent in 2011. The Institute credits this growth to product innovation — companies have developed simpler products, without GLB riders, as an alternative to bank CDs."
Other highlights from the report:
* The election rate for indexed annuity GLBs (when available) dropped 8 percentage points from the prior quarter to 60 percent.
* Sales of fixed-rate deferred annuities improved 32 percent to $9.1 billion for the quarter.
* Despite lower interest rates, SPIA sales were flat in the third quarter at $2.3 billion.
* DIA sales reached $683 million, growing 2 percent compared with Q3 of last year. YTD, DIA sales dropped 7 percent from the prior year at $1.9 billion.
"We are seeing market share spread out among the top ten writers and anticipate DIA sales to increase at a slow, steady pace for the foreseeable future," Giesing said.
