LIMRA: Annuity sales expected to keep breaking records

Annuity sales seemingly could not be better, with numbers smashing records nearly every quarter since the pandemic rebound. But LIMRA experts say there is more room to run.

For starters, advisors are just beginning to warm to annuities. The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 and SECURE 2.0 passed three years later removed many barriers to advisors offering annuities and slotting them inside retirement plans.

Still, it has taken time for fee-based products to be developed and accepted by advisors. It might be the right time for that needle to move in a positive direction, said Keith Golembiewski, assistant vice president of LIMRA and LOMA.

"I really feel it's a great time to convert those non-sellers, or the dabblers, regarding annuities, and really converting them into believers," he said, "making sure that they start thinking about annuities as a potential option when they work with their clients and they do financial planning."

Golembiewski is leading a session today titled, "Future View of U.S.  Annuity Sales: Entering a New Era" during the LIMRA Life Insurance and Annuity Conference in San Antonio.

Propelled by $286.6 billion in fixed annuity sales, total annuity sales reached a record-high $385.4 billion in 2023, jumping 23% year over year, according to LIMRA’s U.S. Individual Annuity Sales Survey.

It marked the second consecutive year that annuity sales blew past previous records, largely due to an expanded engagement with independent distribution, LIMRA executives said. Rising interest rates are making annuities "very attractive to a larger group of investors" who are served by independent advisors and broker-dealers, a LIMRA news release said.

Then again, maybe not...

That looked to change in 2024 as the Federal Reserve signaled an intention to cut rates multiple times. Fed Chair Jerome Powell has since backed off that plan, saying earlier this month that a rate cut could come late in the year, if at all.

"If I had to sum up how the Fed is thinking, I would say 'confusion,'" Golembiewski said. "There are a lot of dynamics happening right now. ... I think expected inflation is the lowest we've seen over the last four years. However, core inflation over the last three months has increased. So there is some volatility and the Fed is definitely being cautious about cutting rates."

One potential fly in the annuity ointment is regulation, Golembiewski acknowledged. Specifically, what the Department of Labor does with its impending fiduciary rule proposal. Unless regulators are taking heed of suggestions made by industry during the public comment period, the rule is likely to be a heavy compliance lift. And that will likely put a damper on annuity sales.

"There are some folks who feel that this is going nowhere, that there isn't going to be any changes," Golembiewski said. "Others are trying to strategically figure out what their business model will be. What are their strategies in case something does happen? How will they operate in the new regulatory world?"

The DOL is expected to publish its fiduciary rule in the next month or two. It attaches a fiduciary standard of care to virtually all annuity sales using retirement plan dollars. Industry opponents are expected to file lawsuits to stop the rule from taking effect.

Whatever happens with regulation, or interest rates, Golembiewski still expects the annuity market to cruise along just fine. The sheer number of Americans who need guaranteed lifetime income bodes well, he said.

"There is that appetite and that need for annuity type products," he said.

InsuranceNewsNet Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.

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