All fixed-annuity products recorded double-digit declines in the first quarter as a result of the economic fallout from the Covid-19 pandemic, according to preliminary results from the Secure Retirement Institute’s “U.S. Individual Annuity Sales” report.
Total fixed-annuity sales fell to $29.5 billion in the first quarter, a 22% decrease from the first quarter of 2019.
On the other hand, total variable annuity sales continued to be a bright spot despite the market volatility. Sales rose 16% in the first quarter, marking the fourth consecutive quarter of sales increase for total variable annuities.
But that might not be for long. Todd Giesing, SRI’s annuity research director, said variable annuity sales are expected to see the impact of March’s volatility in the second quarter, since there tends to be a lag between market conditions and sales.
Sales of registered index-linked annuities, a new product in the VA market, also saw an increase. There were $5.1 billion in sales in the first quarter, up 44% from the previous year. This is the highest quarterly sales figure recorded for registered index-linked annuities since their introduction to the market in 2010.
Giesing explained that these products are positioned to do well under the current economic conditions. “They offer the potential for growth with downside protection. We are forecasting RILAs to continue to grow in 2020,” he said.
At the end of last year, SRI had forecast that fixed-annuity sales would fall in 2020, Giesing said. The Federal Reserve then cut interest rates to record low levels, creating a challenging environment for annuity manufacturers.
Fixed-rate deferred annuities saw the biggest decline, falling to $9.8 billion in the first quarter, a 35% drop from the same period last year.
Single premium immediate annuities followed with a 32% drop to $1.9 billion in the first quarter. SRI noted that this is the lowest quarterly level for single premium immediate annuity sales in nearly seven years. Deferred income annuities totaled $530 million in the first quarter, down 16% from the previous year.
And fixed-indexed annuity sales were at $15.8 billion, down 12% from first quarter of 2019. This marks the third consecutive quarter of declines for these products. SRI noted that despite the 113-basis point drop in the 10-year Treasury rate, fixed-index annuity sales experienced an uptick in March with the extreme volatility in the equity markets.