their fixed annuity cousins by the tens of
billions of dollars, the shift away from
variable annuities is noticeable. That
shift is expected to continue with the
release of new rules by the Department
of Labor, according to two annuity
industry experts.
One of the biggest beneficiaries of the
DOL’s fiduciary rule appears to be fixed
indexed annuities, which booked record
fourth quarter gains and sales of more
than $53 billion last year, according to
Wink’s Sales & Market Report.
“Indexed annuities will grow
exponentially due to the DOL rule
because variable annuities are the
naughty stepchild in the eyes of the DOL
regulators,” said Sheryl J. Moore,
president and CEO of Moore Market
Intelligence and Wink Inc.
DOL behavior toward variable annuities
is “discriminatory,” she said. Variable
annuities have been dealing with
product development and sales
challenges since the 2008 financial crisis,
and as a result, life and annuity carriers
have been wondering what the future
for variable annuities holds.
“The answer is the FIA,” Moore said.
FIA sales last year were the hottest
they’ve ever been, but are recent sales a
harbinger of still yet more growth? And
will that growth be enough to anoint
FIAs the new superstars of the fixed
annuity world — with words of thanks to
DOL regulators?
Variable annuities still outsell fixed
annuities so it's not like the variable
annuity market is going away tomorrow.
In addition, the variable annuity
industry is fighting hard to retain
exemptions that the DOL would like to
remove.
Sales of variable annuities in 2015
dropped 5 percent to $133 billion from
2014. Fixed annuities saw 2015 sales rise
to $103.7 billion, a 7 percent increase
over 2014, according to data published
by LIMRA Secure Retirement Institute.
Variable annuities aren’t going away
anytime soon, but it’s fair to ask if the
market is seeing a structural — and
perhaps permanent — shift away from
variable annuities to alternatives
dwelling on the fixed side of aisle.
Todd Giesing, assistant research director
at LIMRA SRI, said this week that the
market is “starting to see some market
share changes,” and that variable
annuity sales, which once accounted for
as much as 60 percent to 65 percent of
all annuity sales, have lost ground.
By the end of the fourth quarter last
year, the sales ratio between variable
and fixed annuities had dropped closer
to 50-50, with variable annuity sales of
$31.7 billion and fixed annuity sales of
$29.7 billion, LIMRA data reveal.
Of the $29.7 billion in fixed annuity
sales in the fourth quarter, FIAs
contributed $16.1 billion, data show.
Early expectations for 2016, due in part
to the horrible start of the year for
equity markets, is that 2016 will see
variable annuity sales decline further
still.
Annuity markets are waiting until the
DOL issues its final rule — expected
shortly — regarding the sale of
investments into qualified retirement
accounts.
If the DOL’s final rule remains little
changed from the one proposed last
spring, the variable annuity market is
going to be in for a very long year
indeed.
Source: by Writer Cyril
Tuohy has covered the financial services
industry for more than 15 years. Cyril
may be reached at
cyril.tuohy@innfeedback.com
