The US fixed index annuities (FIA) market has seen a rebound over the last three months despite a 27% fall year-on-year.
FIA sales have recovered by 10%, totalling US$13.2 billion while registered index-linked annuity (Rila) sales soared by 29% to US$6.3 billion from the previous quarter of 2020, according to the Secure Retirement Institute (SRI).
Todd Giesing (pictured), director of annuity research at Limra, said the gains in FIA sales can be attributed to operational issues caused by remote working being resolved in the third quarter.
We saw the impact from the social distancing working remotely
“When we look at the second quarter, we saw the impact from the social distancing working remotely. There were operational and technological hurdles that distributors and manufacturers had to overcome,” he said.
Despite the boost, FIA sales in the first three quarters of 2020 were US$41.4 billion, which represent a 27% dip from 2019’s results.
Year-to-date, Rila sales have jumped by 25% to US$15.7 billion from the previous year which was driven by favourable economic conditions that provided investors with downside protection with greater growth potential.
“When we look at the distribution of these products, we are seeing distribution primarily through two channels, which include banks and independent broker dealers,” said Giesing.
According to SRP data, the top five ranking distributors of Rilas in the third quarter of 2020 include Lincoln Financial Group, Equitable Financial, Allianz Life of North America, Brighthouse Financial, and CMFG Life Insurance Company.
“The industry is growing as carriers are entering, so there are some minor shifts though all in all, the pie is getting bigger as distribution expands,” said Giesing. “When you have more carriers that are focused and talking about these products, they are creating more awareness with advisors, educating themselves and broadening the toolkit of solutions that they have for their clients.”
Additionally, variable annuity (VA) sales plummeted by 11% in the third quarter to US$23.5 billion, compared with the third quarter of 2019. In spite of the drop, VA sales were 13% higher than second quarter with bank and full-service national broker-dealers recording over 25% growth.
Total fixed annuity sales stand at US$31.8 billion reflecting a 3% decrease from the third quarter of 2019. In the first nine months of 2020, total fixed annuity sales were $89.4 billion, 18% below the prior year.
“We do expect the momentum that Rilas have in this space to continue as the strain will still be on indexed annuities because of the low interest rate environment,” said Giesing. “From that perspective we do expect slow growth in fixed annuities and fixed indexed annuities in 2021.”