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A Sales Rebound: How Real Is It?

Third-quarter sales numbers revealed a lot of goodness for both life insurance and annuities — but especially annuities.

Several core annuity product lines posted impressive numbers in the quarter, due to a variety of factors. Perhaps the biggest reason is that the settled regulatory landscape freed agents to resume selling popular products.

A couple of big numbers reported by the data collectors:

  • Fixed deferred annuity sales were $29.6 billion, up more than 46 percent when compared to third-quarter 2017, according to Wink’s Sales & Market Report. Fixed deferred annuities include the indexed annuity, traditional fixed annuity and multi-year guaranteed annuity product lines.
  • Variable annuity sales increased 25 percent in the third quarter over the third quarter of 2017, LIMRA reported.

More on annuities in a moment — the big question is, will it continue?

Looking ahead to 2019, Sheryl Moore, president and CEO of Wink, said annuity sales should remain strong across the board.

On the fixed side of deferred annuities (indexed, fixed, multi-year guaranteed), sales are up “primarily because rates have been on the uptick and product manufacturers have been offering incentives over the past quarter,” Moore said.

‘Increased Commissions’

Indexed annuity sales drove much of the third-quarter growth, and were up more than 38.4 percent when compared with the same period last year, according to Wink data.

“Some companies have offered increased commissions to their salespeople, while others have offered more attractive credited rates or increased bonuses to the policyholder — all of which have culminated to an increase in overall sales,” Moore said.

The growth of registered index-linked annuities, or RILAs, tells an interesting story, for example. Sales are estimated to be up nearly 40 percent from the prior quarter. RILAs have a limited negative floor and limited excess interest that is determined by the performance of an external index or subaccounts.

RILA sales are up primarily as a result of new companies entering the market and general interest in this rapidly expanding new product niche, she explained. While RILAs experienced the highest gain, they had the least amount of sales as well, Moore said, referring to it as “making something out of nothing.”

VA sales growth is being driven by an increase in RILA sales, LIMRA said, which were nearly $3 billion in the third quarter.

“With more companies signaling their intention to enter the market, LIMRA SRI expects this market to top $10 billion by the end of 2018,” said Todd Giesing, annuity research director for the LIMRA Secure Retirement Institute. “Greater volatility in equity markets and better pricing due to rising interest rates are attracting consumers looking for a blend of growth and downside protection.”

Third-quarter RILA sales grew 27 percent, representing 12 percent of the VA market. While fee-based VAs increased 43 percent over prior year to $800 million, this is down 6 percent compared with second quarter results.

“There continues to be operational hurdles in the fee-based VA market, which challenge adoption of these products by certain distribution channels. We expect companies will work to resolve these in the next few years,” Giesing said.

LIMRA SRI is forecasting VA sales to increase less than 5 percent in 2018, which would represent the first annual growth for VA sales in six years. VA sales are expected to dip slightly in 2019 in anticipation of equity market declines.

Number Crunching

Third-quarter life insurance new premium sales data had a little good and a little bad.

How good and how bad depends on the time frame comparison and methodology used. Diving deeper into those things explains why LIMRA and Wink were both correct with their “universal life is up” and “universal life is down” reports, respectively. First, the numbers:

  • Indexed UL new premium climbed 10 percent in the third quarter and 12 percent year-to-date, LIMRA reported. Both figures were year-over-year.
  • Non-variable UL was down 11 percent compared to the second quarter and down more than 15.6 percent year-over-year, Wink reported.

All of these data points are correct, but we need to add some context. Wink tallies “non-variable UL,” which included indexed and fixed UL. Wink went on to note that its numbers show IUL down 4.6 percent compared to the second quarter, but up 10.5 percent over third-quarter 2017.

A LIMRA spokesman said the organization is sticking with strictly year-over-year comparisons “because, in our experience, there is a seasonality factor that comes into play. Sales in certain quarters tend to run higher than other quarters.”

IUL premium represented 65 percent of UL premium, and 24 percent of all individual premium for the first three quarters, LIMRA noted.
“Market conditions continue to be favorable for IUL products. IUL premium has increased for the past eight consecutive quarters,” said Ashley Durham, associate research director, LIMRA Insurance Research.

Flat Sales

LIMRA also found that fixed UL sales were flat, mainly due to “product discontinuation and rate hikes.”

UL third-quarter sales were $325 million, down more than 20 percent compared to the second quarter and down 39.1 percent year-over-year, Wink reported.

Other lines were up and down, LIMRA found:

  • Lifetime guarantee universal life declined for the sixth consecutive quarter, down 10 percent in the third quarter. Year-to-date LTGUL fell 16 percent, compared with the prior year. LTGUL represents 17 percent of UL sales and 6 percent of total life premiums.
  • Variable universal life new annualized premium increased 29 percent for the quarter and 14 percent year-to-date.
  • Whole life new annualized premium rose 3 percent in the third quarter.
  • Term life insurance new premium grew 1 percent in the third quarter and year-to-date.

Overall, U.S. life insurance new annualized premium increased 3 percent in the third quarter, and 1 percent for the year, LIMRA found.

Wink plans to add additional product lines, such as term life, to its report in the coming quarters.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. Follow him on Twitter @INNJohnH. John may be reached at [email protected].

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