VAs Power Total Annuity Sales To Near-Record Growth, LIMRA Reports

Total preliminary U.S. annuity sales were $62.2 billion in the third quarter, up 12% from third quarter 2020. Year-to-date, annuity sales increased 19% to $191.4 billion, representing the highest sales in the first nine months since 2008, according to preliminary results from the Secure Retirement Institute U.S. Individual Annuity Sales Survey.

“The surge of the Delta variant pulled overall sales down from second quarter results but continued equity market gains, and low volatility propelled double-digit growth in both traditional variable annuity and registered index-linked annuity sales, resulting in strong year-over-year results,” said Todd Giesing, assistant vice president, SRI Annuity Research.

Total variable annuity (VA) sales were $30.7 billion in the third quarter, up 28% from prior year. VA sales represented 49% of the total annuity market in the third quarter, the highest level since first quarter 2018. In the first three quarters of 2021, total VA sales were $93.4 billion, 32% higher than prior year.

Traditional VA sales were $21.5 billion in the third quarter, a 22% increase from third quarter 2020. Year to date, traditional VA sales totaled $65 billion, up 17% from prior year.

“Traditional VA sales have outperformed expectations this year, driven by the increase of investment-focused VA sales and fee-based annuities, which were fueled by an increased appetite for tax deferral solutions,” Giesing said. “As a result, we expect sales will grow nearly 20% to almost $90 billion, exceeding our forecasted expectations.”

RILAs Rule

Registered index-linked annuity (RILA) sales were $9.2 billion, up 47% from third quarter 2020. For the first three quarters of 2021, RILA sales were $28.4 billion; 81% higher than prior year.

“Third quarter RILA sales dipped from the record-level sales recorded in the second quarter. Improving interest rates and lower volatility have likely made fixed indexed annuity products more attractive to investors seeking greater protection and yield,” noted Giesing. “There are some big VA carriers entering the market with new products this quarter. We’ll have to see if this expands the RILA market further or shifts market share from existing carriers.”

Total fixed annuity sales were $31.5 billion, down 1% from third quarter 2020 results. Year-to-date (YTD), total fixed annuities grew 10% to $98 billion.

Fixed indexed annuity (FIA) sales grew 30% in the second quarter to $17.1 billion — marking the highest quarterly sales in two years. FIA sales were $47.1 billion in the first nine months, up 14% from prior year.

“Product innovation around cap rates and steady interest rates have helped drive FIA sales in the third quarter,” Giesing said. “Concerns about inflation could boost FIA sales in the coming months as investors seek principal protection with greater investment growth to offset rising inflation. We expect FIA sales to surpass $60 billion by year end.”

Fixed-rate deferred annuity sales fell to $11.3 billion, down 28% from third quarter 2020. YTD, fixed-rate deferred sales totaled $41.9 billion, 9% higher than prior year.

“Despite the decline in the third quarter, there aren’t better short-duration investment options available in the market today,” Giesing said. “With $150 billion in existing fixed-rate deferred contracts coming due, we expect exchanges will keep annual sales in the $50 billion range in 2022 through 2025.”

Income annuities — both immediate and deferred — are still struggling under the low interest rate environment. While rates have slowly improved, interest in these products remains low.

Immediate income annuity sales were $1.5 billion in the third quarter, 7% higher than prior year. YTD, immediate income annuity sales fell 6% to $4.4 billion.

Third quarter deferred income annuity (DIA) sales increased 29% from prior year to $540 million. In the first nine months of 2021, DIA sales were $1.47 billion, 19% higher than in the same period of 2020.

Preliminary third quarter 2021 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 top 20 rankings of total, variable and fixed annuity writers for third quarter 2021 will be available in late November, following the last of the earnings calls for the participating carriers.