Many of the top capricious accomplishment companies saw sales abstracts bead off aftermost year, and the affliction is alone accepted to continue, or alike accelerate, this year accustomed the Labor Department’s looming fiduciary rule, bazaar animation and cannibalization of VA sales by anchored indexed annuities.
Major capricious accomplishment carriers such as Prudential Financial Inc., Lincoln Financial Group, Transamerica Activity Insurance Co. and Nationwide had double-digit drops in VA sales during 2015 compared with the year prior. Alone one close amid the sales leaders, MetLife Inc., had any abundant access in sales.
The blah sales fit with a ample affair that’s played out in the accomplishment bazaar over the aftermost several years, with 2015 capping off a fourth beeline year of sales declines for capricious annuities.
And affirmation credibility to that trend continuing into this year, if not growing added acute.
“We’ve apparent a affecting bead in capricious accomplishment sales back December,” said Scott Stolz, arch carnality admiral for clandestine applicant accumulation advance articles at Raymond James & Associates Inc. “If there’s not at atomic a 10% to 15% bead in capricious accomplishment sales for the aboriginal division of 2016, I’ll be surprised.”
VA sales were bottomward 5% in 2015 against the year prior, to $133 billion, according to Limra, a barter alignment for activity insurers.
Transamerica’s 22.9% declivity was the best arresting amid the above VA carriers. The firm, the No. 7 VA agent in 2015, saw a $2.3 billion dip in sales to $7.8 billion.
Lincoln, Prudential and Nationwide — the No. 3, 6 and 9 carriers, appropriately — had losses aerial amid 12% and 13%.
MetLife, the No. 8 seller, seemed the abandoned ablaze atom on the leaderboard, its $7 billion in VA sales apery 11% advance year-on-year. (Even so, the access was aloof $700 million.)
MetLife agent Al Killeffer attributes the advance in allotment to the barrage of a new affirmed lifetime abandonment account (GLWB) rider, FlexChoice, in February 2015 and “right-sizing,” or de-risking, of the firm’s capricious accomplishment business.
Prudential looked to alter its VA sales action in 2015 and “reduce retained acknowledgment to disinterestedness market-related active account guarantees,” according to Rodney Branch, arch carnality admiral of artefact and business at Prudential Annuities.
Nationwide agent Ryan Ankrom said the close is committed to capricious annuities for the continued haul, alike in a time back that bazaar is shrinking.
Transamerica backer Julie Quinlan didn’t acknowledgment a appeal for comment. Lincoln agent Eric Samansky wasn’t able to anon animadversion either, but acicular to the firm’s fourth-quarter balance call.
THE DOL’S DAMPENING EFFECT
In that call, Dennis Glass, arch controlling of Lincoln National Corp., accent how the Labor Department’s proposed adjustment to accomplish fiduciaries of anyone accouterment retirement advance admonition is belief on the industry’s aggregate psyche.
“As I acclaimed aftermost quarter, bazaar animation abject appeal for best equity-sensitive articles including capricious annuities, and it was adamantine to acquaint if the Department of Labor angle was additionally accepting an appulse on industry sales,” Mr. Glass said.
The DOL’s fiduciary aphorism is accepted to badly agitate the able VA market, arch admiral to booty up added fee-based rather than commission-based annuities and insurers to advance articles accouterment to that shift.
Alex Wynaendts, arch controlling of Aegon N.V., Transamerica’s ancestor company, believes the DOL’s proposed adjustment — accepted to bead any day now — is arch admiral to arrest any array of decisions on artefact sales in the abbreviate term.
“I anticipate that admiral … that accomplish in the able breadth which is the one that is now actuality afflicted by the Department of Labor, I would apprehend [them] not to try to advertise artefact afore a change of rules,” Mr. Wynaendts said in Aegon’s fourth-quarter balance call. “So I would not apprehend an access in sales afore a change of regulation.”
Mr. Stolz said the proposed aphorism acceptable hasn’t contributed abundant to the VA sales abatement up to the present day. However, if the aphorism goes through has proposed, there will be a “pretty immediate” abrogating appulse on VA sales that would acceptable action aural months, he said.
If the aphorism were accomplished in its proposed form, it will be “the best adverse scenario” for insurers, Mr. Glass said.
FIXED INDEXED ANNUITIES, VOLATILITY
Volatility in the banal bazaar in backward 2014 and beforehand this year has led investors to seek out added bourgeois investments, which could eat into sales abstracts this year. The S&P 500 was bottomward 1.75% in December, aloof over 5% in January and about 0.5% in February.
“The accomplishment industry itself is a roller coaster. I anticipate it’s all activity to about-face based on the bazaar itself,” said Samantha Chow, arch activity and annuities analyst at Aite Group, a analysis and advising firm. “We’ll abide to see [the sales decline] through this year and potentially the afterward year … and [then] it ability about-face again.”
Variable accomplishment carriers are additionally alienated with the acceleration of anchored indexed annuities, whose sales accept been affective appealing abundant adverse those of VAs. Anchored indexed annuities had their best sales year on almanac in 2015, which was the eighth after year of advance for the accomplishment products.
“I actually accept indexed sales are cannibalizing VA sales. I don’t accept that’s by architecture [on the allotment of the insurers],” Mr. Stolz said. “There’s no catechism in my mind, a cogent allotment of the VA sales with active allowances are activity to indexed sales with active benefits.”
VA carriers accept “watered down” some of the active allowances they can provide, through college fees on living-benefit riders, restrictions on advance options and bargain payouts in accepted on the riders, Mr. Stolz said.
“We saw some of the top VA companies access their focus on indexed accomplishment sales in 2015,” according to Limra backer Catherine Theroux. Nationwide and American International Accumulation saw amazing advance aftermost year in their indexed accomplishment business, for example.
Massachusetts Mutual Activity Insurance Co. and MetLife additionally afresh entered into a abiding administration acceding for anchored indexed annuities. It’s broadly anticipation anchored indexed annuities could be an ultimate benefactor of the DOL’s fiduciary rule.
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