The pending Department of Labor fiduciary rule is dragging down most annuity sales, according to the LIMRA Secure Retirement Institute.
U.S. annuity sales were $52 billion during the first quarter, a slight uptick from the fourth quarter 2016, but a 12 percent decline from the first quarter 2016, according to LIMRA’s First Quarter 2017 U.S. Retail Annuity Sales Survey. This is the fourth consecutive quarter of decline in overall annuity sales.
Uncertainty around the DOL rule overwhelmed any positive impact annuity sales might have felt from the improvements in the equities market and in the interest rate environment, says Todd Giesing, assistant research director of the LIMRA Secure Retirement Institute.
Variable annuities sales were $24.4 billion in the first quarter, down 8 percent from fourth-quarter 2016.
“While we believe the DOL is playing a significant role in the declining VA sales, this downward sales trend began before the DOL announced their rule,” Giesing says. “Sales with a guaranteed living benefit continued to decline at a much faster rate than products without. In fact, where we are seeing growth is in the structured variable annuity market. In the first quarter, structured settlements grew 60 percent compared to first quarter 2016. This segment represents about 5 to 10 percent of the total VA market.”
The declines are going to continue, according to the institute. Variable annuity sales will drop another 10 percent to 15 percent in 2017.
In the first quarter, sales of fixed annuities fell 15 percent to $27.6 billion. All fixed product lines sales experienced declines.
“Despite the decline in first-quarter fixed annuity sales, this is the fifth consecutive quarter fixed sales outperformed variable sales,” Giesing says. “The last time this happened was nearly 25 years ago.”
Indexed annuity sales fell 13 percent to $13.6 billion. Sales of indexed annuities with guaranteed living benefits dropped off significantly in the first quarter, to the point where more indexed annuity sales were without a guaranteed living benefit than with one, the institute says.
“While we typically see a seasonal decline in the first quarter, we suspect there are some companies re-evaluating their product mix in anticipation of the DOL rule,” Giesing adds. “Unless there is a change in the DOL fiduciary rule rollout, we are anticipating indexed sales in 2017 to decline for the first time in a decade.”