Investors scrambling to lock in rates propel annuity sales to record highs

In the aftermath of the 2008-09 financial crisis, Americans flocked to the safe gains provided by fixed annuities and sales soared. It is happening again.

Total annuity sales surged to $310.6 billion in 2022, a 22% increase from 2021 results and 17% higher than the record set in 2008, according to preliminary results from LIMRA’s U.S. Individual Annuity Sales Survey.

“Investors seeking guaranteed growth and downside protection drove extraordinary fixed annuity sales of $208 billion, 49% above the record set in 2019,” said Todd Giesing, assistant vice president, LIMRA Annuity Research. “Fluctuating interest rates in the fourth quarter prompted investors to lock in crediting and payout rates while they were high. Our forecast suggests that protection products will continue to boost growth in the annuity market for the next several years.”

In the fourth quarter of 2022, total annuity sales were $87.2 billion, a 39% increase from the fourth quarter of 2021. This marks the third consecutive quarter in which annuity sales set a new record.

Huge sales increases

Total fixed-rate deferred annuity sales were $37.5 billion in the fourth quarter, 241% higher than fourth quarter 2021 sales. This is the best sales quarter for fixed-rate deferred annuities ever documented. In 2022, fixed-rate deferred annuities totaled $112.1 billion, more than double (111%) the sales in 2021. This is 38% above the previous annual high of $80.8 billion set in 2002.

Fixed indexed annuity sales also had a record quarter and year. In the fourth quarter, FIA sales were $21.9 billion, a 32% increase from prior year. This tops the previous quarterly sales record set last quarter. For the year, FIA sales were $79.4 billion, up 25% from 2021, and 8% higher than the record set in 2019.

“Current economic conditions are ideal for the FIA market. Insurers have been able to offer very competitive crediting rates while protecting the principal investment from equity market volatility, making FIA products more attractive to investors for the foreseeable future,” noted Giesing. “In 2023, LIMRA is forecasting FIA sales to experience moderate increases, as investors continue to seek protection and growth opportunity. We expect this growth to continue through 2025.”

Registered index-linked annuity (RILA) sales were $9.9 billion in the fourth quarter, down 4% from the fourth quarter 2021. Despite lower fourth-quarter results, total RILA sales reached $40.9 billion in 2022, 6% higher than prior year and a new all-time high for the product line’s sales.

VAs sales lag behind

Traditional variable annuity (VA) sales continued to falter. In the fourth quarter, traditional VA sales fell 42% to $12.6 billion. In 2022, traditional VA sales totaled $61.7 billion, down 29% from 2021 results. To put these results into perspective, annual traditional VA sales peaked at $184 billion in 2007. Given the current economic forecast and competitive pressures, there is little expectation that sales will improve significantly over the next several years.

Improved interest rates have spurred growth in the income annuity market. Single premium immediate annuity (SPIA) sales were $3.1 billion in the fourth quarter, a year-over-year increase of 94%. In 2022, SPIA sales were $9.1 billion, 44% higher than 2021 results. In the fourth quarter, deferred income annuity (DIA) sales rose 59% to $720 million. For the year, DIA sales were $2.1 billion, up 24%. LIMRA forecasts income annuity sales to experience steady growth through 2026.

Preliminary fourth quarter 2022 annuity industry estimates are based on monthly reporting, representing 83% of the total market. A summary of the results can be found in LIMRA’s Fact Tank.

Fourth quarter 2022 top 20 rankings of total, variable and fixed annuity writers will be available in early March, following the last of the earnings calls for the participating carriers.

This report compiled by InsuranceNewsNet staff.