Annuity sales surge as new pathways open for advisors

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Annuity sales keep rising higher — and everyone from issuers to, potentially, the U.S. Congress is making it easier for financial advisors and their clients to buy them.

Fixed annuity sales jumped 38% year-over-year to $38 billion, reaching the highest level ever tracked in the first quarter by the LIMRA Secure Retirement Institute. Fixed contracts of $132 billion and the fixed-index product sales of $69.6 billion both set records in 2018.

Notching the best first quarter in a decade, sales of all types of annuities also grew by 17% from the year-ago period to $60.8 billion. After a court decision vacated the Department of Labor's fiduciary rule in March 2018, slumping annuity sales have transformed into a surge.

The record swell doesn’t appear to be letting up anytime soon: LIMRA’s midpoint forecast predicts a 5% increase in sales in 2019. Sales could jump more than 20% over the next five years to $280 billion, according to the industry research organization.

Carriers, turnkey asset management platforms and custodians are providing avenues to achieve that growth by giving RIAs more access to the products. The House of Representatives also passed a bill on May 23 that could also make it easier for 401(k) providers to offer them.

Over the long term, the aging population and advances in technology point to sales optimism for LIMRA, which does caution that political or regulatory changes could undercut the rosy forecast. The current regulatory climate, equity volatility and interest rates are fueling short-term gains.

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FIA sales of $17.7 billion — a 25% jump — constitute the “strongest first quarter ever” for the products, Sheryl Moore, CEO of the research and consulting firm Wink, said in a prepared statement. “It is unusual to see sales up this much year-over-year, but low fixed rates and market volatility have lent favorably to this product line.”

Wink and LIMRA each reported that structured annuity sales soared by 60% year-over-year to $3.5 billion in the first quarter. LIMRA refers to the products as registered indexed-linked annuities, noting variable sales slipped by 14% when excluding the structured products.

Sales of multi-year guaranteed annuities expanded by more than any other product line in the past year, Moore notes. The products jumped by 80% year-over-year to $14.6 billion, according to Wink.

In terms of carriers, AIG took the largest market share at more than 7% of sales, followed by Jackson National Life Insurance, Lincoln Financial Group, New York Life and Allianz. Jackson’s Perspective II variable product sold at the highest level of any product tracked by Wink.

Annuity firms like Jackson have been offering many more fee-only products in recent years. The issuer and TD Ameritrade unveiled a distribution agreement earlier this month to offer the advisory version of Perspective II on the custodian’s annuity platform.

Another custodian — BNY Mellon’s Pershing — also announced a series of enhancements to its annuity platform with further integrations of fee-only annuities ahead. In addition, the TAMP giant Envestnet opened its own annuity platform for fee-based and commissionable products.

Annuities could reach more advisors and clients under provisions of a bill now in the Senate after passing the House in a 417 to 3 vote. With bipartisan support and a similar existing bill in the Senate, the legislation appears likely to overcome the holds reportedly placed on it by as many as six Republican Senators.

The SECURE Act would give 401(k) sponsors a safe harbor from legal liability in the event of an insurer’s inability to satisfy the terms of a contract. Among other provisions, the bill would eliminate the “stretch” IRA strategy for higher-income earners, provide a tax credit for small businesses to offer retirement plans and expand 401(k) access for part-time workers. It won backing from FSI, SIFMA and AARP.

“The gaps in America’s retirement savings system undermine our nation’s financial security, increase the risk of poverty among our retirees, and strain our social safety net,” TIAA CEO Roger Ferguson and AARP CEO Jo Ann Jenkins wrote in a Forbes column supporting the bill.

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Annuities Fixed annuities Variable annuities RIAs Tax planning LIMRA Wink