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US Annuity Sales Rise in Q2, But Still Down Nearly 10% from 2016

Non-qualified sales buoyed variable annuity market, IRI reports.

By Michael Katz

The Insured Retirement Institute (IRI), a financial services trade association, reported that the US annuity industry totaled $50.4 billion in sales for the second quarter, up 2.4% from $49.2 billion the previous quarter, but down 9.8% from $55.9 billion in the same period last year.

Fixed annuity sales during the second quarter rose 3.1% to $26.7 billion from the $25.9 billion reported in the first quarter, but were down 9.5% from $29.5 billion in sales for the second quarter of 2016. Meanwhile, variable annuity total sales increased 1.7% to $23.7 billion in the second quarter from $23.3 billion in the previous quarter, but fell 10.2% from sales of $26.4 billion in the second quarter of 2016. The figures from the IRI are based on data reported by Beacon Research and Morningstar, Inc.

It is “encouraging to see growth in industry-wide sales of annuities,” said Cathy Weatherford, president and CEO of IRI, in a statement. “IRI believes annuity sales will continue to increase as thousands of Americans enter retirement each day.”

According to Beacon Research, the quarterly increase in total fixed annuity sales was led by sales of fixed indexed products. Fixed indexed annuity sales climbed 10% to $14.9 billion from $13.6 billion in the first quarter, although sales were down 7.1% from the second quarter of 2016, when $16.1 billion in sales were reported. Overall fixed annuity sales also increased 11% from the previous quarter to $2.8 billion on strong sales of income annuities.

Book value and market value adjusted annuities had combined sales of $9 billion, which was down 7.7% from $9.8 billion during the first quarter, and 8.9% below sales of $9.9 billion for the year-ago quarter. For the entire fixed annuity market, there were approximately $15.1 billion in qualified sales, and $11.6 billion in non-qualified sales during the second quarter.

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Variable annuity net assets increased 1.8% to $1.98 trillion during the second quarter, which was 5.1% higher than the same period last year, as positive market performance continued to overcome the impact of lower sales and negative net flows, according to Morningstar. Net flows in variable annuities were negative $14.8 billion in the second quarter.

Within the variable annuity market, there were $15.3 billion in qualified sales and $8.4 billion in non-qualified sales during Q2. Qualified sales dropped 1.8% from Q1 sales of $15.6 billion, while sales of non-qualified variable annuities gained 8.6% from Q1 sales of $7.7 billion.

“While total variable annuity sales rose slightly, the largest increases were in non-qualified sales,” said John McCarthy, senior product manager at Morningstar. “We are also seeing growth in newer investment-oriented products such as structured annuities.”

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Home > News > Research > Preqin: Institutional Investors Increasingly Concerned with High Pricing
Research

Preqin: Institutional Investors Increasingly Concerned with High Pricing

Private equity, private debt are most well-received asset classes.

By Chris Butera

While institutional investors reported that they were generally satisfied with their portfolio performances, and were seeking to maintain or increase allocations over the next year, valuations were among their highest concerns, according to a survey from Preqin.

Of the 540 institutional investors surveyed, 78% currently invested in alternate assets, with 47% investing in three or more classes. Private equity and real estate were the most sought-after classes, with 56% of investors involved in each,.

Private equity was also the most well-perceived asset class, with 58% of investors reporting positivity towards the class. The second-most well-perceived class was private debt, at 57%.

While a greater proportion of the surveyed plan to increase their long-term allocations across most asset classes, 44% of hedge fund investors plan to reduce their longer-term allocation (twice as many as those planning to increase it). Long-term reductions are also being planned for 13% of natural resources investors, with only 17% looking to allocate more.

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Key issues in the coming year among the largest proportions of investors across all private capital assets are high asset pricing, while hedge fund investors were mostly concerned with performance (69%) and fees (59%). Valuations were cited as a key issue in the coming month from 86% of private equity investors and 72% of real estate investors.

According to the survey, a “greater proportion of investors” are finding more difficulty in sourcing attractive investment opportunities.

“Currently, investors face the challenge of choosing between more than 17,100 alternative assets funds which are open to investment, and fund managers face unprecedented levels of competition. These factors, as well as strong performance from the majority of alternative asset classes, and record levels of dry powder, have contributed to investors’ increased concern over high pricing in the industry,” Oliver Senchal, head of real estate products, said in a statement.

“As investors flock to alternatives, they are increasingly opting for bigger, more-established firms. This places pressure on less-established fund managers, who are facing greater competition for the remainder of investor commitments and will have to find ways to stand out from one another in order to attract capital. However, strong long-term performance by alternatives have continued to entice investors to private capital, and we expect to see further expansion of the alternatives industry.”

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