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Life Health > Annuities > Variable Annuities

IRI Sees Strong Sales of Plain-Vanilla Fixed Annuities

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What You Need to Know

  • Sales of all individual annuities increased 7.4%, to about $59 billion.
  • Variable annuity assets under management rose 1.2%.
  • Variable annuity stock fund holdings climbed by $57 billion.

A new U.S. individual annuity market report shows that sales of plain-vanilla fixed products soared in the fourth quarter of 2021.

Sales of book value fixed annuities increased 50% between the fourth quarter of 2020 and the latest quarter, to $6.6 billion, according to the Insured Retirement Institute.

A book value annuity is a traditional fixed annuity. It pays the same rate of return even if the holder withdraws money before the end of the annuity contract period.

Life insurers also sell another type of slightly spicier fixed annuity — the market-value-adjusted annuity.

When the holder of an MVA annuity takes cash out before the contract period ends, the insurer will change the interest rate applied to the contract value to reflect changes in interest rates.

Sales of MVA annuities fell 50%, year over year, to $3.7 billion.

The IRI Data

IRI is a Washington-based group for all kinds of companies with an interest in annuities and other insured income strategies, such as life insurers, asset managers, broker-dealers, banks, marketing organizations, law firms and annuity market support services vendors.

IRI gets its variable annuity data from Morningstar Inc. and its fixed annuity data, including data for indexed annuities filed as non-variable products, from Beacon Annuity Solutions.

Both Morningstar and Beacon collect data on registered indexed-linked annuities — variable annuities with crediting rates linked to the performance of one or more investment indexes, rather than to the performance of investment funds.

IRI reports the RILA figures together with the variable annuity totals.

Because the IRI report is for the fourth quarter of 2021, it does not reflect the effects of the turmoil caused by Russia’s invasion of Ukraine, which began Feb. 24.

Overall Results

IRI says overall individual annuity sales increased 7.4%, year over year, to about $59 billion.

Sales of all types of annuities classified as fixed, including book value annuities, MVA annuities and non-variable indexed annuities, increased 0.9%, to $28 billion.

Sales of all types of variable annuities increased 14%, to about $31 billion.

RILAs

Life insurers like selling RILAs, because managing a contract with crediting rates tied to investment indexes tends to be cheaper and easier than managing a contract with crediting rates tied to investment funds.

Life insurers also like selling RILAs because registering an annuity with the Securities and Exchange Commission as a variable product gives the issuer the ability to limit how much protection against loss of account value that the issuer provides.

RILA sales increased 23%, year over year, to $10.4 billion.

That compares with a 10% increase in sales, to $20.5 billion, for other types of variable annuities.

Assets

An IRI analysis of asset allocations within variable annuities shows that investment options linked to stock funds performed that best, and that allocations to most other types of investment options fell.

Total variable annuity assets increased 1.2%, to $2.1 trillion.

Contract holders ended 2021 with $747 billion in stock fund options, up from $690 billion a year earlier. That means variable annuity stock fund holdings grew by $59 billion.

Fixed account holdings increased 0.4%, to $359 billion.

The amount of cash parked in money market fund options fell 17%, to $24 billion.

What the Numbers Mean

The new IRI results suggest that retirement savers and their advisors might be more interested both in the safest possible annuity options and in the most variable options, and less interested in middle-of-the-the-road options.

(Image: Adobe Stock)