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Fiduciary Rule Killing Annuity Sales

Quarterly sales plummeted to $46.8 billion in the third quarter, down 13 percent from prior year

401k, annuities, sales, fiduciaryOff. A. Cliff.

Despite continual delays for full implementation, the fiduciary rule is having an impact, particularly in the area of annuities and guaranteed products.

Total quarterly U.S. annuity sales have fallen below the $50-billion mark for the first time in 15 years (2002) and marks the sixth consecutive quarter of decline in overall annuity sales.

LIMRA Secure Retirement Institute reports sales of $46.8 billion in the third quarter, down 13 percent from prior year.

“Despite strong economic indicators, both variable and fixed annuities fell short of last year’s sales results Todd Giesing, director of annuity research at LIMRA, said in a statement.  “[W]e are confident the initial implementation of the Department of Labor’s fiduciary rule on June 9 had a negative effect on sales, particularly on IRA contracts.”

In the first nine months of 2017, overall annuity sales were $152.7 billion, down 11 percent from prior year.

For seven straight quarters, fixed sales have outperformed variable annuity (VA) sales. The last time this happened was nearly 25 years ago.

The Institute predicts overall annuity sales to be around $200 billion at the end of 2017.

“This has been a challenging year for the individual annuity market, but we expect the environment to improve in 2018,” Giesing noted.

Third quarter variable annuity sales were $21.8 billion, down 16 percent from prior year. This is the 15th consecutive quarter of declines and the lowest level of quarterly VA sales in 20 years.

Year-to-date, VA sales were $70.9 billion, 11 percent lower than the first nine months of 2016.

Declines were particularly prevalent in IRA contracts for VAs. IRA sales dropped 24 percent in the third quarter, a much steeper decline than the 3 percent dip non-qualified VA sales experienced.

Fixed annuity sales were not immune to the impact of the initial implementation of the DOL fiduciary rule. Third quarter sales were $25 billion, down 11 percent compared with prior year.  Year-to-date, fixed sales also fell 11 percent to $81.8 billion.

Fixed indexed annuity (FIA) sales were $13.7 billion in the third quarter, a 9 percent decline compared with the third quarter 2016.

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