Fixed annuity products propel growth as investors seek investment protection and steady growth
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WINDSOR, Conn., July 21, 2022—Total U.S. annuity sales increased 22% to $77.5 billion in the second quarter, according to preliminary results from LIMRA’s U.S. Individual Annuity Sales Survey. This marks the highest quarterly sales ever recorded since LIMRA began tracking annuity sales and nearly $9 billion above the previous record set in fourth quarter 2008 during the Great Recession.
“Continued equity market declines and rising interest rates drove investors to purchase record-level fixed-rate deferred annuities in the second quarter,” said Todd Giesing, assistant vice president, LIMRA Annuity Research. “Our research shows fixed-rate deferred annuity manufacturers are, on average, offering interest rates more than four times that of a bank CD, which has made these products a tremendous value for investors looking for protection and growth potential.”
Total fixed-rate deferred annuity sales were $28.2 billion in the second quarter, 76% higher than second quarter 2021 sales. This is the best sales quarter for fixed-rate deferred annuities ever recorded. In the first six months of 2022, fixed-rate deferred annuities totaled $44.1 billion, a 44% increase compared with the same period last year.
Fixed indexed annuity (FIA) sales also had a strong quarter. FIA sales were $19.7 billion in the second quarter, up 19% from prior year. Year-to-date (YTD), FIA sales were $36 billion, a 20% increase from last year.
FIAs, Fixed-Rate Deferred Products Benefit From Rate Increases
“Both FIAs and fixed-rate deferred products benefited from the significant interest rate increases in the second quarter,” said Giesing. “Coupled with a nearly 20% equity market decline, investors sought out principal protection and growth potential, which these products offer.”
Registered index-linked annuity (RILA) sales also improved in the second quarter, up 5% to $10.5 billion. In the first half of 2022, RILA sales were $20.1 billion, 5% higher than prior year.
“While RILA products offer protection against the significant market declines we witnessed in the first half of the year, the crediting rates are often linked to indices tied to equities and bonds, which have not fared as well under current market conditions. As a result, the remarkable growth RILAs experienced over the past three years has slowed,” noted Giesing.
Market conditions were not as favorable for traditional variable annuity (VA) sales. In the second quarter, VA sales fell 32% to $15.4 billion, the lowest quarterly results since the fourth quarter of 1995. YTD, VA sales totaled $33.9 billion, down 22% from the same period in 2021.
Rising Rates Boost Income Annuities
Rising interest rates helped the income annuity market but expectations of further rate increases by the Federal Reserve have likely damped the growth. Single premium immediate annuity sales were $2 billion in the second quarter, 25% higher than prior year. YTD, single premium immediate annuity sales were $3.5 billion, an increase of 13% over last year. In the second quarter, deferred income annuity sales fell 13% year-over-year to $443 million. YTD, DIA sales were $808 million, also down 13%.
Preliminary second 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.
Second quarter 2022 top 20 rankings of total, variable and fixed annuity writers will be available in August, following the last of the earnings calls for the participating carriers.