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LIMRA Secure Retirement Institute: Fixed Indexed Annuity Sales Record Strongest Growth in Third Quarter

Q3 Sales—LIMRA Press Release

FIAs on Pace to Exceed $60 Billion in 2016

WINDSOR, Conn. Nov. 21, 2016—Fixed indexed annuity (FIA) sales increased five percent in the third quarter, to $15.0 billion, according to LIMRA Secure Retirement Institute’s Third Quarter U.S. Annuity Sales survey.

In the first nine months of 2016, FIA sales increased 22 percent compared to prior year to $46.9 billion.

“While most other annuity products have faltered because of falling interest rates and anticipation of the Department of Labor (DOL) fiduciary rule, FIAs continue to thrive,” said Todd Giesing, assistant research director, LIMRA Secure Retirement Institute. “Indexed annuities are on pace to exceed $60.0 billion by year end, a 10 to 15 percent increase over prior year.”

Total U.S. annuity sales were $53.6 billion in the third quarter, down 11 percent from the prior year. This is the second consecutive quarter of decline in overall annuity sales. Year-to-date, total annuity sales declined two percent to $170.9 billion.

For the third consecutive quarter, fixed annuities have maintained the majority of the annuity market sales. In the third quarter, fixed annuity product sales represent 51 percent and variable annuity (VA) sales hold 49 percent of the market. Two years ago VA’s had a 61 percent share.

VA sales totaled $25.9 billion in the third quarter, 21 percent lower than prior year. This is the lowest quarterly sales level since 1998 and the first time VA sales have been below $30.0 billion for three consecutive quarters since 2002. Year-to-date, VA sales totaled $79.4 billion, a decline of nearly $22.0 billion compared to 2015.

“There has been a significant drop in sales by independent broker-dealers this year as they prepare for the impending DOL fiduciary rule,” noted Giesing. “With so many factors still unknown, carriers have been slow to introduce new products.”

LIMRA Secure Retirement Institute is forecasting VA sales to end the year around $105.0 billion, down just over 20 percent. Without changes on the DOL fiduciary rule coming from the new Administration or Congress, the Institute predicts VA sales will fall another 25 to 30 percent in 2017.

Overall fixed annuity sales increased one percent in the third quarter, to $27.7 billion. In the first nine months of 2016, fixed annuity sales totaled $91.5 billion, an increase of 25 percent.

Despite the challenging interest rate environment, the Institute forecasts fixed annuities to rise 15 to 20 percent in 2016 compared with prior year. This will counter falling VA sales. As a result, total annuity sales should end the year flat to 2015.

Sales of fixed-rate deferred annuities, (Book Value and MVA) fell 4 percent, to $8.5 billion. Year-to-date, fixed-rate deferred product sales totaled $31.0 billion, up 38 percent.

Falling interest rates in the third quarter undermined income annuity sales. Fixed immediate annuity sales dropped four percent in third quarter to $2.2 billion. Year-to-date fixed immediate annuity sales equaled $7.2 billion, 11 percent higher than the first nine months of 2015.

The Institute expects fixed immediate annuity sales to end the year around $9.5 billion, 7 percent higher than 2015.

Deferred income annuity (DIA) sales fell 11 percent in the quarter to $605.0 million. Year-to-date, DIAs improved 19 percent compared with prior year, totaling $2.2 billion. DIA sales are projected to exceed $3.0 billion, around 15 percent higher than 2015.

For links to the third quarter 2016 Annuities Industry Estimates, the top twenty rankings of total, variable and fixed annuity writers for third quarter 2016, the breakout of indexed and fixed-rate annuity sales rankings, and the variable, fixed and total annuity sales over the past 10 years, please visit www.annuityoutlookmagazine.com. to view the online press release.

LIMRA Secure Retirement Institute’s third quarter U.S. Individual Annuities Sales Survey represents data from 96 percent of the market.

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