IRI Issues 2018 Fourth Quarter Annuity Sales Report

Posted on May 8, 2019

Contact: Dan Zielinski

Annuities Make Solid Gains in 2018 as Fixed Indexed Annuities Set Another Record

WASHINGTON, D.C. – Overall annuity sales rose 9.7 percent in 2018, with the combined sales of fixed and variable annuities reaching $218 billion, according to the Insured Retirement Institute (IRI), which today announced final 2018 market data for the U.S. annuity industry based on data reported by Beacon Research and Morningstar, Inc.

Total annuity sales

  • $58.8 billion - industry-wide annuity sales in the fourth quarter of 2018
    • 7.1 percent increase from sales of $54.9 billion in the third quarter of 2018
    • 23.5 percent higher versus fourth quarter of 2017 sales of $47.6 billion
  • $218.0 billion – full year 2018 total annuity sales
    • 9.7 percent increase versus 2017 total annuity sales of $198.6 billion

Fixed Annuity Sales

  • $35.9 billion – 2018 fourth quarter fixed annuity sales
    • 12.7 percent increase over third quarter sales of $31.8 billion
    • 51.6 percent higher versus 2017 fourth quarter sales of $23.7 billion
    • $125.0 billion in fixed annuity sales is an increase of 17.0 percent over 2018 fixed annuity sales of $106.8 billion
  • Variable annuity sales

  • $22.9 billion – 2018 fourth quarter variable annuity total sales
    • Down 0.7 percent versus 2018 third quarter sales of $23.0 billion
    • 4.3 percent lower than 2017 fourth quarter VA sales of $23.9 billion
    • $92.9 billion in 2018 sales is an increase of 1.2 percent over 2017 VA sales of $91.8 billion
  • “It’s encouraging to see annuity sales rising, particularly as we continue to witness large numbers of the Baby Boom generation retire each day," said IRI President and CEO Wayne Chopus. “These products offer retirees and near retirees the ability to create secure, guaranteed lifetime income from their investments – protection that is both sorely needed and unavailable in any other retirement product.”

    According to Beacon Research, fixed annuity sales were robust across all product types.

  • $19.6 billion – New high-water mark for fixed indexed annuity sales reached in the fourth quarter of 2018.
    • 8.8 percent increase versus 2018 third quarter sales of $18 billion (the previous record)
    • 42 percent higher versus 2017 fourth quarter sales of $13.8 billion
    • $69.9 billion in 2018 sales sets a new annual record, an increase of 28.8 percent over 2017 sales of $54.3 billion and 16.3 percent higher than the previous annual record of $60.1 billion set in 2016
  • $8.9 billion - Book value annuity sales
    • Book value sales rose 27.7 percent versus $7.0 billion in the third quarter of 2018
    • 2018 fourth quarter sales were 91 percent higher than 2017 fourth quarter sales of $4.6 billion
    • 2018 full-year book value annuity sales of $27.9 billion were 34.5 percent higher than 2017 sales of $20.7 billion
  • $4.1 billion - Market value adjusted (MVA) annuity sales
    • Fourth quarter MVA sales were unchanged from 2018 third quarter sales of $4.1 billion
    • MVA sales increased 61 percent versus fourth quarter 2017 sales of $2.5 billion
    • 2018 full year MVA sales of $15.8 billion came in 28.0 percent higher than 2017 sales of $12.4 billion
  • $3.3 billion - Income annuity sales
    • 19.6 percent increase versus 2018 third quarter income annuity sales of $2.7 billion
    • 24.0 percent higher than 2017 fourth quarter income annuity sales of $2.6 billion
    • On a year-over-year basis, income annuity sales of $11.4 billion represented a 9.1 gain over 2017 sales of $10.5 billion, and also reached a new high

For the entire fixed annuity market, there were approximately $20.6 billion in qualified sales and $15.3 billion in non-qualified sales during the fourth quarter of 2018.

“Fixed indexed annuities continue to set records, providing consumers with an instrument that can help them diversify their portfolios, protect principal, and provide guaranteed lifetime income,” said Beacon Research CEO Jeremy Alexander, “and we expect all fixed annuity product types to continue showing robust growth in 2019 as millions of Americans seek solutions that can help them feel secure during retirement.”

According to Morningstar, variable annuity net assets rose in the third quarter as the bull market in equities continued to drive higher valuations in subaccount assets.

  • $1.8 trillion – Variable annuity assets fell 9.5 percent from just over $2 trillion in the third quarter, as market volatility weighed on equity and allocation subaccounts.
    • Assets were 8.6 percent lower than the just under $2 trillion recorded at the end of 2017
    • Allocation funds continue to be the largest asset class by share of assets, at $676.8 billion, or 37.3 percent of total variable annuity assets.
    • Equity funds held $590.6 billion, or 32.6 percent of total VA assets

Net asset flows in variable annuities were -$20.2 billion in the fourth quarter, a 4.3 percent drop from $19.4 billion in the third quarter of 2018. Net flow for the full year 2018 stood at -$79.2 billion, as compared to -$66.7 billion in full year 2017 net flow. Within the variable annuity market, there were $15.3 billion in qualified sales and $7.6 billion in non-qualified sales during the fourth quarter of 2018. For the year, qualified sales were $60.2 billion, or 64.8 percent of total VA sales, while non-qualified accounted for $32.7 billion, or 35.2 percent.

“Higher volatility and market losses weighed on VA assets,” said Michael Manetta, Senior Quantitative Analyst at Morningstar, “but we did not see a corresponding plunge in sales. With equity markets recovering in the first quarter of 2019 we should see sales continue to improve, with gains in lifetime income products and structured annuities, which offer protection against the impact of volatility.”

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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, retirement plan providers and sponsors, and institutional investors in the private capital markets. Morningstar provides data and research insights on a wide range of investment offerings, including managed investment products, publicly listed companies, private capital markets, and real-time global market data. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $200 billion in assets under advisement and management as of December 31, 2018. 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.