Total annuity sales dropped during 2016, with only a few bright spots showing through because of increases in the sales of fixed and fixed-income annuities, the Insured Retirement Institute reported Thursday.
Fourth-quarter and full-year reports from Morningstar and Beacon Research revealed industry-wide annuity sales declined, with the fourth quarter of 2016 totaling $48.2 billion, a 6 percent decline from $51.3 billion during the third quarter of 2016. It also marked an 18.4 percent decline from $59.1 billion in the fourth quarter of 2015. For the full year, industry-wide sales were $211.4 billion, down 7.6 percent from full-year 2015 sales of $228.8 billion, IRI says.
“Continued pressure from low interest rates and ambiguity around the DOL fiduciary rule negatively impacted overall variable annuity sales in the fourth quarter,” said Kevin Loffredi, senior product manager at Morningstar, “but we did see increases in sales of certain variable annuities offering both guaranteed income options and higher levels of equity market exposure.
“Additionally, we saw strong growth in index-linked, or ‘structured’ annuities, which provide a level of protection against downside risk,” he added. “Sales of these products were up 80 percent over the fourth quarter of 2015, as investors sought to lock in years of stock market gains while hedging against a possible future downturn.”
At the same time, Beacon Research says fixed annuity sales during the fourth quarter of 2016 fell to $23.8 billion, an 8.4 percent decline from $26 billion during the third quarter of 2016 and a 15.6 percent decline from $28.2 billion during the fourth quarter of 2015.
Full-year fixed annuity sales reached $109.3 billion, an 11.1 percent increase over 2015 full-year fixed annuity sales of $98.4 billion, which is a new high water mark for fixed annuity sales, Beacon says.
Cathy Weatherford, the president and CEO of the Insured Retirement Institute, said, “While both total and variable annuity sales were down from 2015, year-over-year strength in fixed and fixed-indexed annuity sales demonstrates both continued demand for the accumulation, protection and income solutions provided through annuities, and the resilience and creativity of the retirement industry in bringing products to market that effectively meet that demand.”