With the Department of Labor’s fiduciary rule announcement looming, annuity sales remained strong in the first quarter of 2016, but sales of variable annuities were down steeply.
According to an analysis by a Washington, D.C.-based industry group, the Insured Retirement Institute, annuity sales totaled $56.7 billion for the first quarter, a 7.6 percent increase from the first quarter of 2015.
Variable annuities sandbagged the overall sales growth, however, decreasing to $26 billion in the first quarter, down 18.5 percent from the first quarter of 2015, when they totaled $31.8 billion, and 16 percent from the fourth quarter of 2015, when they totaled $30.9 billion.
“It appears that a rough start for the markets in 2016 had a significant impact on first quarter sales,” said Kevin Loffredi, senior product manager at Morningstar, in a released statement. “In particular, we saw a 28 percent drop in sales from December to January. However, in February and March, we saw healthy gains in month-over-month sales of 15.4 percent and 5.2 percent, respectively, as markets stabilized and then recovered.”
Variable annuity assets increased slightly over the first few months of 2016, reaching $1.87 trillion for the first quarter, a 0.2 percent increase from the previous quarter.
Overall annuity sales were down from the fourth quarter of 2015, when $59.1 billion in annuities were sold.
In the first three months of 2016, fixed annuity sales were at $30.7 billion, their highest level in seven years, a 47.2 percent increase from sales of $20.9 billion in the first quarter of 2015, and an 8.8 increase from sales of $28.2 million in the fourth quarter of 2015.
Fixed indexed annuity sales were also a bright point in the first quarter, totaling $15.6 billion, which represents a 34.9 percent increase from sales of $11.6 billion in the first quarter of 2015, but a 2.8 percent decline from record sales of $16.1 billion in the fourth quarter of 2015.
The sale of market-value-adjusted annuities also increased in the first quarter to $5.3 billion, a 164 percent increase from $2 billion in sales during the first quarter of 2015, and a 66 percent increase from $3.2 billion in sales in the fourth quarter of 2015.
The Insured Retirement Institute’s analysis is based on data reported by Morningstar and Northfield, Ill.-based Beacon Research.