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Retirement Planning > Retirement Investing > Annuity Investing

Annuity Buyers Rush for the Raincoats

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What You Need to Know

  • Wink says non-variable indexed annuities showed the biggest year-over-year sales gains.
  • Sales of traditional variable annuities dropped the most.
  • LIMRA saw some growth in RILA sales.

Your clients may be preparing for investment market storms but hoping the sun will come out soon.

The battle between the raincoats and the beach towels showed up last week in new annuity issuer sales survey data from Wink.

Overall deferred annuity sales increased just 2.2% between the first quarter of 2021 and the first quarter of this year, to $60 billion.

Sales of the kinds of non-variable products that can protect your clients against loss of account value, even in severe downturns, performed much better than sales of products without account value guarantees — but savers preferred the non-variable products that gave them the most chance to profit from investment market gains.

What It Means

Clients might be buying more non-variable products partly because rising interest rates have made guaranteed products look more attractive.

But clients might also be thinking that any volatility related to Russia’s invasion of Ukraine and other geopolitical issues, such as the COVID-19 pandemic, will be short-lived, and that investment prices will soon pop back up.

The Numbers

Here’s a look at how sales of some of the types of annuities Wink tracks changed between the first quarters of 2021 and the latest quarter:

  • Non-variable indexed annuities: $17 billion (up 15%).
  • Multi-year guaranteed annuity contracts: $15 billion (up 9.9%).
  • Traditional fixed annuities: $465 million (up 2.8%).
  • Registered index-linked annuities: $9.4 billion (down 4.6%).
  • Traditional variable annuities: $19 billion (down 12%).

Wink based the new annuity sales figures on data from 16 index-linked variable annuity issuers, 43 variable annuity issuers, 44 traditional fixed annuity issuers and 68 multi-year guaranteed annuity (MYGA) issuers.

Sales of all types of non-variable deferred annuities Wink tracks increased 12%, year-over-year.

Sales of variable deferred annuities fell 6.9%.

Definitions

A traditional fixed annuity locks in a specified crediting rate for up to one year.

A MYGA contract locks in a crediting rate for more than one year.

The holder of a traditional variable annuity can choose from a menu of subaccount funds that perform like mutual funds. The issuer can decide how much, if any, protection to provide against loss of account value.

The crediting rate of a registered index-linked annuity, or RILA, depends on the performance of one or more investment indexes. Like the issuer of a traditional variable annuity, the issuer of a RILA can decide how much protection the contract will provide against loss of account value.

A non-variable indexed annuity is similar to a RILA, but the issuer must protect the holder against investment-related loss of account value.

RILA Sales

LIMRA, a nonprofit insurer consortium, also conducts an annuity issuer survey, with a list of participants that’s somewhat different from the Wink list.

One difference between the companies’ results involves RILA sales.

Wink calls those products structured annuities.

RILA sales have grown rapidly over the past decade because insurers have seen offering them as a way to cut investment management costs and maintain tight control over how much investment risk they assume.

LIMRA survey participants reported that RILA sales rose 5% in the latest quarter. Wink survey participants reported a 4.6% drop in RILA sales.

Pictured: St. George, Utah. (Photo: Adobe Stock)