Total annuity sales tumbled 24% from second quarter 2019 a result of the global pandemic and its economic fallout, according to preliminary results from the Secure Retirement Institute U.S. Individual Annuity Sales Survey.
Todd Giesing, senior annuity research director at SRI, said in addition to the record-low interest rates and continued market volatility, social distancing has significantly disrupted business operations for companies and advisors over the past three months.
Geising said SRI believes investors will hold off purchasing income annuity products, hoping interest rates rebound over the next six to 12 months.
But Giesing noted that while annuity products saw double-digit sales declines, products that offer investment protection, like fixed-rate deferred and registered index-linked annuities, were able to maintain and even grow business in the second quarter.
Total variable annuity sales hit their lowest quarterly level since 1996, falling 20% to $20.5 billion after four consecutive quarters of growth. VA sales were $46.5 billion in the first half of 2020, down 4% from the first half of 2019.
Registered index-linked annuity products (RILA) continued to be a bright spot in the VA market. RILA sales were $4.5 billion in the second quarter, 8% higher than in second quarter 2019, SRI said, noting that is the 22nd consecutive quarter-over-quarter growth for RILA sales. Year to date, RILA sales were $9.4 billion, up 22% from the first half of 2019.
“As we saw over the last few quarters, the low interest rates have hampered fixed-indexed annuity (FIA) rates. As a result, we believe advisors are gravitating to RILAs, which offer downside protection with greater potential,” Giesing said.
Geising said RILA sales have grown at the expense of fixed-index annuity (FIA) sales. In the second quarter, FIA sales fell 41% to $11.9 billion, the lowest quarterly total for FIAs since first quarter 2015. Year to date, FIA sales totaled $28.1 billion, falling 26% compared with prior year.
Total fixed annuity sales dipped 26% from 2019 to $28.3 billion in the second quarter. In the first half of 2020, fixed annuity sales dropped 24% to $58.1 billion. Fixed-rate deferred annuity sales jumped 33% from the prior quarter to $13.0 billion. Year to date, fixed-rate deferred annuity sales totaled $22.8 billion, which is 19% lower than prior year results.
“Low interest rates dampened fixed-rate deferred annuity sales in the first quarter, but as we saw during the Great Recession, these product sales soared in the second quarter as consumers looked to protect their investment from market volatility and losses,” noted Giesing. SRI also noted that income annuity sales suffered because of historically low interest rates.
Single premium immediate annuities (SPIAs) were $1.5 billion in the second quarter, 44% below results in the second quarter of 2019. This is the lowest quarterly level of SPIA sales in 13 years. Year-to-date, SPIA sales were $3.4 billion, down 38% compared with sales results from the first six months of 2019.
Additionally, deferred income annuity sales (DIA) were cut in half to $370 million in the second quarter. Year-to-date, DIA sales were $840 million, sinking 38% from prior year results.