Annuity sales are taking a beating in the third quarter. Another report, this time rom the Bank Insurance & Securities Research Associates (BISRA), which tracks annuity premiums sold through banks, charted a 12-year low in annuity sales.
In total, annuity sales fell 7 percent in Q3 to $7.5 billion. Coming in at $4.5 billion, variable annuities were off 6 percent from the second quarter and 13 percent below the third quarter of 2011. Of the top 10 variable annuity (VA) carriers, only three reported gains in Q3, BISRA reported in its quarterly annuity sales survey.
That contrasts with mutual funds, which saw sales inch up 1 percent to a five-year high last quarter. BISRA pointed out that many VA carriers continue to remake products in an effort to deal with the low interest rate environment by cutting investment selections and reducing living benefit features. Those moves, in turn, make “VA products less attractive to consumers wanting to take advantage of an up market,” the BISRA report stated.
But VAs were not the only annuity product line that slumped in the third quarter. Fixed annuity sales tumbled to $3 billion, the lowest sales tally since the first quarter of 1999. Compared to a year ago, Q3 sales decreased 25 percent. When measured against the first nine of last year, fixed annuity premium was down 33 percent.
Janet Cappelletti, head of research at BISRA, noted in a statement that simultaneous “significant” declines in VA and fixed annuity sales is rare.
“Generally market conditions will favor one product type over the other,” she stated. “We saw sales for both fixed and variables shrink in the fourth quarter of last year but other than that, this hasn’t happened since 2003.”
In the fixed annuity space, the results was skewed by a 64 percent reduction at Western National, which has until recently accounted for 30 percent to 40 of market share, BISRA noted. Conversely, Nationwide rose to the top spot after upping production 70 percent and offering a 1.5 percent floor, which was dropped to 1 percent last month.
In comparison to CDs, the product fixed annuities are most often compared to, the average five-year CD rate exceeded the average five-year fixed annuity yield by 10 basis. In the ensuring months, fixed annuity yields have remained above CD rates, which have fallen consistently, but the “point spread has remained slim,” BISRA reports.
Other surveys have recorded a drop in annuity sales, particularly of the variable and fixed variety. However, income annuities have booked sales gains.