2019 Fixed Annuity Study

The author would like to thank Jeremy Alexander and Monika Hunsinger of Beacon Research for allowing access to their comprehensive store of annuity sales data and granting permission for a portion of this research to be shared.

Data for this article was drawn from the Beacon Research “Fixed Annuity Premium Study.” The study reports sales data provided quarterly by participating insurance companies as well as results reported in statutory filings and other publicly available sources. Beacon checks this data for general reasonableness, but does not perform independent audits. Beacon uses this data to estimate overall sales and sales by product type.

Beacon Research offers a suite of products to access industry leading annuity data mined from industry filings, researched from company websites, collected from annuity issuers and rigorously quality-checked by experienced data analysts and issuing companies. Beacon Research provides the most comprehensive and accurate fixed and variable contract and sales data in the industry. They can be contacted at 800-720-3504 or on the web at www.beaconresearch.net.

For calendar year 2018 estimated U.S. fixed annuity sales were $125 billion, up 28 percent from 2017.

With the exception of fixed income, all other fixed annuity segments posted double digit increases. Fixed rate annuity sales, including both market value adjusted (MVA) and non-MVA, exploded from $33.1 billion to $43.7 billion. Fixed index annuity sales jumped from $54.3 to $69.9 billion. Fixed income—deferred income annuities (DIA) and immediate income annuities—increased nine percent from the previous year to end up at $11.4 billion.

Product Trends
Once again, the Allianz 222 was far and away the top selling fixed annuity, followed by New York Life Secure Term MVA Fixed Annuity.

Four of the top ten selling fixed annuities were fixed rate (non-MVA), three were fixed index, two were fixed rate (MVA) and one fixed income (SPIA) completed the field.

Overall sales rose eight percent in the first quarter of 2018 when compared to the fourth quarter of 2017, and then jumped up more than 25 percent in the second quarter. Third quarter sales were flat, but rose again by 13 percent when comparing the fourth quarter to the third. When compared to fourth quarter 2017 sales, fourth quarter 2018 fixed annuity sales were up 52 percent.

Interest Rate Trends
Overall interest rates were higher at the end than at the beginning of the year. The Advantage Insurer Bond Yield Index had the overall average yield on new bonds purchased by insurers at the end of 2017 at 3.78 percent and at 4.55 percent at the end of December 2018. In recent months interest rates have trended significantly lower.

Fixed annuity rates ended the year up three-quarters percent from where they began. The average yield on five-year multiple year guaranteed annuities (MYGA) was 2.04 percent in December 2017 and 2.81 percent in December 2018.

Best Selling Products By Channel
The top 10 selling products in the independent channel space and top eight in the independent broker/dealer channel are all fixed index annuities; in the wirehouse space fixed index annuities had nine out of ten slots. This contrasted sharply with the large regional broker/dealer channel where only one company with two index products cracked the top ten; in the large regional broker/dealer channel fixed rate (MVA) annuities had the lead. In the bank channel, fixed rate annuities also had the edge. (View complete list here)

Distribution Trends
In 2018 captive and independent agents were responsible for more than 45.6 percent of total fixed annuity sales, down from more than 50 percent two years prior. Also in 2018 banks did 26.2 percent of sales with wirehouses and broker/dealers contributing 25.7 percent—up almost four percent from 2015; direct sales were at 2.5 percent.

Roughly 90 percent of independent agent sales were in fixed index annuities; they represent less than three percent of total immediate and deferred immediate annuity sales.

The Forecast
With the uncertainty of the Department of Labor’s ill-conceived and poorly-written Fiduciary Rule Revision swept away, fixed annuity sales recovered and then soared last year. Although the interest rate picture has become cloudier as 2019 progresses, the forecast is for another record setting year for fixed annuity purchases.

Jack Marrion provides research and consulting services to insurance companies and financial firms in a variety of annuity areas. He also serves as director of research for the National Association for Fixed Annuities and as a research fellow for Webster University.

In 1994 he wrote a book to help banks market investment and insurance solutions to their small business clients. In 1996 he produced the first independent hypothetical return monthly publication comparing all index annuities on the market, and in 1997 created the first comprehensive report of index annuity sales, products and trends, “Advantage Index Product Sales & Market Report” (quarterly).

His insights on the annuity and retirement income world have appeared in hundreds of publications. In 2006 the National Association of Insurance Commissioners asked him to address their annual meeting and teach regulators the realities of index annuities. He was invited back in 2009 to talk to the NAIC about the effects of aging on senior decision-making. He is a frequent speaker at industry functions.

Prior to forming Advantage Com­pen­dium, Marrion was president and owner of an NASD broker/dealer with offices in nine states. Previous to that he was vice president of a life insurance company and vice president of an NYSE investment banking firm. He has a BBA from the University of Iowa, an MBA from the University of Missouri, and a doctorate from Webster University.

Marrion can be reached at Ad­van­­tage Compendium. Telephone: 314-255-6531. Email: ­marrion@advantagecompendium.com.