Sales of fixed-indexed annuities (FIA) have shattered sales records in the United States, jumping 21% higher than first-quarter sales, according to LIMRA’s Secure Retirement Institute’s second quarter 2018 sales survey.
“This quarter’s FIA sales topped the record set in the fourth quarter 2015 by 12%,” said Todd Giesing, annuity research director, LIMRA Secure Retirement Institute. “Growth was widespread with all of the top 10 manufacturers reporting double-digit growth from the first quarter 2018. Clearly, with the Department of Labor’s (DOL) fiduciary rule vacated and the prospect of continued rising interest rates, demand for this product is high.”
In the first half of this year, FIA sales were $32.1 billion, 14% higher than the first half of 2017. Fee-based FIA sales were $67 million in the second quarter.
FIA sales expected to grow even more during the rest of 2018
LIMRA is forecasting FIA sales to grow 5%-10% this year, exceeding the prior annual record of $59.1 billion and to continue to show growth in 2019 and 2020.
Total annuity sales were $59.5 billion, 10% above the second quarter 2017 results and 15% higher than the first quarter. The last time sales were at this level was in the first quarter of 2015.
Fixed annuity sales drove most of this quarter’s growth, which have outperformed variable annuity (VA) sales in eight of the last 10 quarters.
“Despite introducing new products and making changes to enhance their existing products to make them more competitive, companies are not having the same success with VAs as they are with fixed annuities,” noted Giesing. “However, the new and enhanced VAs, combined with the vacated DOL rule and better economic conditions, have led to slightly improved sales.”
The DOL rule, intended to impose a fiduciary standard on financial advisors and insurance companies in their handling of Employee Retirement Income Security Act (ERISA) and individual retirement accounts, had become the subject of harsh scrutiny over the last two years.
In a June 21st decision, the 5th Circuit Court of Appeals issued an order vacating the rule.