Fixed annuity sales boom after 1Q interest rate hikes, SRI says

Total U.S. annuity sales increased 4% to $63.6 billion, according to preliminary results from the Secure Retirement Institute U.S. Individual Annuity Sales Survey, with fixed products benefitting from interest rate hikes.

“First quarter annuity sales tend to be a bit slower. While sales in the first two months of 2022 were a bit sluggish, annuity sales in March were at record-high levels,” said Todd Giesing, assistant vice president, SRI Annuity Research. “Rising interest rates and increased market volatility shifted the product mix this quarter with fixed annuity products driving the overall growth.”

Total fixed annuity sales were $35.2 billion, up 14% over first quarter 2021. Double-digit growth for fixed indexed annuities and fixed-rate deferred annuities drove the overall fixed annuity sales to pre-pandemic levels.

Fixed indexed annuity (FIA) sales were $16.3 billion, 21% higher than prior year. Fixed-rate deferred annuity sales increased 10% in the first quarter, year-over-year to $16 billion.

“Both FIAs and fixed-rate deferred products benefited from the significant interest rate increases in the first quarter,” said Giesing. “Coupled with a nearly 5% equity market decline, investors sought out principal protection and steady growth, which these products offer.”

Traditional variable annuity (VA) sales were $19.1 billion in the first quarter, down 8% year-over-year.

Registered index-linked annuity (RILA) sales were $9.3 billion. While this is 2% higher than first quarter 2021, it reflects a 10% drop from prior quarter.

“Market conditions in the first quarter have made FIAs more attractive than RILAs. As a result, the remarkable growth RILAs experienced over the past three years has leveled off,” noted Giesing.

Immediate income annuity sales were $1.5 billion in the first quarter, level with first quarter 2021. Deferred income annuity sales fell 18% to $300 million in the first quarter.

“We finally are beginning to see payout rate increases for income annuities as interest rates improve,” said Giesing. “However, because the Fed has signaled additional rate hikes later this year, we expect investors to wait to lock in rates so sales will likely remain muted in the second and third quarters.”

Preliminary first quarter 2022 annuity industry estimates are based on monthly reporting, representing 85% of the total market. A summary of the results can be found in LIMRA’s Fact Tank.

The 2021 top 20 rankings of total, variable and fixed annuity writers will be available in May, following the last of the earnings calls for the participating carriers.