The Big Reveal On Quarterly Annuity Sales
September 4, 2013 by Linda Koco
Annuity professionals sure would like to know which direction annuity sales are going. Every time the quarterly annuity sales numbers come out, annuity professionals ask themselves if this a smoke signal or just yesterday’s news.
That question is especially relevant in these times of major shifts in the annuity industry. These include not only the much publicized exits and moratoriums of recent years but also the product changes and curtailments that keep on coming.
Most advisors do not have the deep data upon which to develop considered financial projections of their own. However, they can get inklings from the sales data that research organizations make available to the industry at no cost — in particular, from the quarter-to-quarter, or sequential, results.
The recent second quarter sales numbers from Insured Retirement Institute (IRI) provide a case in point. The overview came out yesterday and is available here.
The big picture view is that industry-wide annuity sales for second quarter rose 9.9 percent to nearly $54.5 billion from $49.6 billion in the previous quarter, but were down 1.4 percent from $55.3 billion in the second quarter of 2012. (That’s pretty close to LIMRA’s estimates from a few weeks ago, which put second quarter total annuity sales at $56.5 billion, up 9 percent from first quarter but down 1 percent from second quarter last year.)
The Seesaw
What to make of the up/down annuity seesaw? The quarterly numbers can help with that.
Fixed Annuities: The IRI report shows total fixed annuity sales for the last five quarters were, in millions: $17,140 (2Q 2013), $14,960 (1Q 2013), $16,200 (4Q 2012), $16,570 (3Q 2012) and $17,100 (2Q 2012). These numbers come from data provided to IRI by Beacon Research.
Variable Annuities: The IRI report shows total variable annuity sales for the last five quarters were, in millions: $37,315 (2Q 2013), $34,631 (1Q 2013), $34,355 (4Q 2012), $36,303(3Q 2012) $38,168 (2Q 2012). These numbers come from data provided to IRI by Morningstar.
The quarterly numbers for fixed annuities suggest the industry as a whole is regaining ground after suffering through one of the roughest periods in its history when interest rates were at rock-bottom lows. The rebounding of interest rates in the first half no doubt provided a nice impetus — something positive for advisors to point out to customers.
It was a similar story for variable annuity sales. The numbers show an industry rallying after some tough times — when stock market volatility was uncomfortably high and many customers were skittish. Then, in recent months, the stock market hit new highs, volatility talk cooled and variable annuity sales enjoyed a nice bounce.
Data analysts caution against putting too much reliance in quarterly sales results, since seasonal variances can impact performance in one quarter or another. It could be that one quarter’s results could be a harbinger of absolutely nothing.
Valid point, that. However, the pattern of quarterly results can provide a sense of momentum, and it’s momentum that can be meaningful to a lot of advisors. Are things getting better or not?
To get that perspective, it helps to compare the above quarterly numbers to total annuity sales shown in IRI’s second quarter report from the previous year (2012). Here are those results:
Fixed annuities: That IRI report shows that total fixed annuity sales for second quarter 2012 and the previous four were, in millions: $17,106 (2Q 2012), $16,943 (1Q 2012), $17,330 (4Q 2011), $19,000 (3Q 2011) and 20,670 (2Q 2011). This data was from Beacon Research.
Variable Annuities: The IRI report shows total variable annuity sales for second quarter 2012 and the previous four were, in millions: $38,168 (2Q 2012) $36,211 (1Q 2012), $37,221 (4Q 2011), $39,119 (3Q 2011) and $39,986 (2Q 2011). This data was from Morningstar.
The same pattern shows up. That is, both the fixed and variable annuity industries brought sales back up in the second quarter after experiencing declines.
The combined picture
Now, let’s put the two sets of numbers together to see the two-year picture for both product lines.
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Total Fixed Annuity Quarterly Sales Data from IRI 2nd quarter reports in 2013 and 2012 In millions |
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| 2Q | 1Q | 4Q | 3Q | 2Q | |
| IRI 2013 report | $ 17,140 (2Q 2013) | $14,960 (1Q 2013) | $16,200 (4Q 2012) | $16,570 (3Q 2012) | $17,100 (2Q 2012) |
| IRI 2012 report | $17,106 (2Q 2012) | $16,943 (1Q 2012) | $17,330 (4Q 2011) | $19,000 (3Q 2011) | 20,670 (2Q 2011) |
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Total Variable Annuity Quarterly Sales Data from IRI 2nd quarter reports in 2013 and 2012 In millions |
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| 2Q | 1Q | 4Q | 3Q | 2Q | |
| IRI 2013 report | $37,315 (2Q 2013) | $34,631 (1Q 2013) | $34,355 (4Q 2012) | $36,303 (3Q 2012) | $38,168 (2Q 2012) |
| IRI 2012 report | $38,168 (2Q 2012) | $36,211 (1Q 2012) | $37,221 (4Q 2011) | $39,119 (3Q 2011) | $39,986 (2Q 2011) |
The numbers show that the industry is certainly resilient. Although fixed and variable annuity sales are not yet back to the quarterly sales levels of two years ago, total sales have pushed forward from a year ago in each side of the industry — the green shoots of a restructured business. This happened even though a number of carriers are still limiting how much business they will write and in which products while other carriers are offering less generous designs and/or new restrictions.
This is important information for advisors to have, especially those who are worried about the staying-power of the industry and whether they should recommend annuities to clients going forward.
The quarterly numbers also show that although some advisors stopped selling, and some consumers weren’t buying, annuities during the industry’s most difficult era in recent history, the dark times did not trigger the wholesale exodus that some had predicted.
