Fixed annuities post best-ever quarterly sales

In the second quarter, total U.S. annuity sales increased 16% to $79.4 billion, as measured by LIMRA’s U.S. Individual Annuity Sales Survey, which represents 90% of the market.

In the lead, fixed rate deferred annuities (FRD), which posted their best quarterly results ever recorded: sales totaled $28.7 billion, or 79% more than a year earlier.

“All fixed products showed positive growth,” Todd Giesing, assistant vice president of LIMRA Annuity Research in Windsor, Conn., said in a press release.


Safer investments, without downward price fluctuations
He attributed the record numbers to a flight to safety during stock market volatility, aided by rising interest rates. “With average returns at or above 3% for fixed rate deferred annuities, this is a rate environment we haven’t seen in a long time,” Giesing noted.

Fixed-rate deferred annuities are contracts that offer a fixed annual percentage return and tax-deferred growth, usually at a higher rate of growth due to lack of cash; instead of an income stream over a set period of time, annuitants receive a lump sum payment at the end of the contract.

“Fixed annuity rates have adjusted quickly this year, following 10-year Treasury rate increases,” said Jason Branning of Branning Wealth Management in Ridgeland, Mississippi. “Given the volatility of stocks and bonds, many consumers are attracted to the fixed rates offered annuities and the stability of asset values ​​in a fixed contract. Fixed annuities continue to offer better rates than many bonds with a similar risk profile.

Cyrus Bamji, director of communications for the Washington, DC-based Alliance for Lifetime Income, noted that thousands of Americans are retiring every day and the majority of them are uncertain about their financial future. “It’s more than just a flight to safety that’s unfolding,” he says. “It’s a flight to protection,” Bamji said.


Ranking of carriers
Giesing said the carriers that did best in the quarter were “those with a diverse range of annuity product offerings.”

For some industry observers, this makes perfect sense. “Large carriers offering multiple ranges of annuities are able to take advantage of changes in product desirability and channel activity because they offer most or all types of annuities and are present in all channels,” said said Frank O’Connor, vice president of research at Insured Retirement Institute in Washington, DC

The top seller of annuities of all types for the quarter was New York Life, with $11.2 billion in annuity sales. The second highest seller was AIG Cos. at $9.7 billion. This is followed by Massachusetts Mutual Life ($8.3 billion), Jackson National Life ($8.2 billion) and Equitable Financial ($7.7 billion). Jackson National was also the main provider of variable annuities.


The life of the RILA
The second best-selling type of annuity during the quarter was index-linked annuities (RILA), a type of variable annuity (VA) that credits owners a percentage of market index gains and limits losses. Although pegged to a stock index, RILAs offer downside protection with generous upside potential.

It’s a combination that has made them incredibly popular in recent years. In the second quarter, RILA sales were the highest on record, growing nearly 8% year-over-year to $10.8 billion. They now account for 40% of overall VA sales.

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