Fiduciary Rule Whacks Annuities

Something just happened for the first time in 25 years

401k, annuities, retirement, salesSales are down (a lot).

Fiduciary rule fallout continues, with a (not unexpected) decrease in annuity sales of 10 percent, to $105.8 billion, when compared with the first six months of 2016.

First half sales haven’t been this low since 2001, LIMRA Secure Retirement Institute reports in its Second Quarter 2017 U.S. Retail Annuity Sales Survey.

Second quarter results for total annuity sales were $53.9 billion, a slight uptick from the first quarter, but an 8 percent decline from this quarter last year.

This is the fifth consecutive quarter of decline in overall annuity sales. It is also the sixth straight quarter fixed sales have outperformed VA sales, which hasn’t happened in almost 25 years.

Variable Annuities

U.S. variable annuity sales were $24.7 billion in the second quarter, down 8 percent compared with prior year results.

This marks the 14th consecutive quarter of decline in VA sales. Sales from the first half of 2017 VA sales were $49.1 billion—8 percent lower than the first six months of 2016.

“A closer look at what’s driving the drop in VA sales reveals qualified VA sales have experienced a more significant decline than non-qualified VAs,” Todd Giesing, director of annuity research with LIMRA Secure Retirement Institute, said in a statement. “VA qualified sales were down 16 percent in the second quarter, while nonqualified sales were actually up 5 percent. This could be in reaction to the DOL fiduciary rule.”

Second quarter qualified VA sales accounted for 58 percent of retail variable annuity sales, a five-percentage points decline from the same quarter last year.

Sales of fee-based variable annuities increased in the second quarter to $570 million, representing 2.3 percent of the total VA market. While this is a small portion of the overall VA market, these products have seen continued growth over last year.

Another VA product line that has experienced growth are structured variable annuities. In the second quarter, sales of these products have increased 36 percent, reaching $1.8 billion, which represents 7 percent of the VA market

Institute forecasts VA sales will drop 10 percent to 15 percent in 2017, totaling less than $100 billion. This has not occurred since 1998.

Fixed Annuities

Fixed annuity sales also declined in the second quarter. Sales were down 7 percent to $29.2 billion.

All fixed product lines sales, except structured settlements, experienced declines. In the first half of 2017, fixed sales fell 11 percent to $56.7 billion.

Indexed Annuities

Second quarter indexed annuity sales totaled $15.6 billion, a 15 percent increase from the first quarter but are still four percent lower than prior year results.

Nine of the top 10 companies have reported quarter-over-quarter growth. The Institute predicts indexed annuity sales will decline 5 percent to10 percent in 2017.

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