Variable Annuity Sales Fall to 15-Year Low on Volatility

  • Customers sought safety in fixed annuities, Limra says
  • Sales may fall at least 15% in 2016, another 25% in 2017

Sales of variable annuities fell to the lowest since 2001 in the first three months of this year as customers flocked to safety amid stock market volatility.

First-quarter sales dropped 18 percent from a year earlier to $26.6 billion as almost all of the top insurers reported declines, according to data Thursday from industry group Limra. Customers bought about $4.3 billion from Prudential Plc’s Jackson National, the No. 1 seller, down almost $1 billion from the same period a year earlier.

Insurers and their customers have been retreating from variable annuities, where returns can fluctuate based on results in equity markets. The retirement products also face scrutiny in a Labor Department rule released in April that is designed to protect savers from conflicted investment advice on high-fee products. Limra said sales could fall at least 15 percent this year and another 25 percent in 2017, when the regulation goes into effect.

“The start of the year saw tremendous volatility with steep declines in the equity markets, falling nearly 10 percent within the first three weeks,” Todd Giesing, Limra’s assistant research director, said in the statement. “While it did rebound into positive territory by the end of the quarter, the substantial volatility hurt VA sales and helped fixed products as people sought out safety being offered in indexed and fixed-rate deferred products.”

Lincoln, Transamerica

Lincoln National Corp.’s variable annuity sales slumped 36 percent to $1.8 billion. Transamerica, the U.S. operation of Dutch insurer Aegon NV, sold $1.2 billion, compared with $2.3 billion a year earlier.

At MetLife Inc., the largest U.S. life insurer, the variable annuity figure was little changed at $1.6 billion. American International Group Inc.’s total dropped 27 percent to $2.1 billion.

Industrywide sales of fixed annuities, which guarantee a return without the upside of variable annuities, climbed about 48 percent to $32.3 billion in the quarter, and are expected to increase 15 to 20 percent this year, Limra said. The figure could decline in 2017, the group said, citing the inclusion of some of those products under the U.S. rules, a move that surprised some investors.

New York Life Insurance Co. and AIG were the top sellers of fixed annuities in the quarter, with more than $3 billion each.

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