Look for Record-Breaking Annuity Sales in Q1: LIMRA

Last year’s unprecedented long-term market volatility prompted consumers to pay a record $312.8 billion for the protection offered by annuities, LIMRA reported Thursday. Total U.S. annuity sales in 2022 increased by 23% year over year and were 18% higher than the previous record of $265 billion set in 2008.

The increase was driven by $209.9 billion in fixed annuity sales, also a record.

“The interest rate dip in December spurred investor demand looking to lock in the favorable rates before they dropped further,” Todd Giesing, assistant vice president of LIMRA Annuity Research, said in a statement. “As a result, total fourth quarter annuity sales marked a new record of $89.4 billion, a 42% increase from the fourth quarter of 2021.”

Giesing noted that LIMRA data showed an 80% year-over-year increase in pending total annuity contracts in January. “LIMRA expects the sales momentum experienced in 2022 to continue and is forecasting a record-breaking first quarter 2023.”

Bank sales grew in the fourth quarter by 117% to $21.8 billion. For the full year, bank sales hit a record $73.7 billion, 69% higher than the year before. In 2022, banks were the top annuity sales channel for the first time since 2004, making up 24% of the market.

“Banks, which traditionally attract more conservative investors, drove the growth that resulted in record-high fixed-rate deferred sales,” Giesing said. “Throughout 2022, short-term FRD crediting rates outpaced comparable CD rates, making them appealing to investors seeking guaranteed growth and protection.”

Fixed-Rate Deferred Sales Take Off

Fixed-rate deferred annuity sales in the fourth quarter came in at $38.4 billion, 249% higher than the same period in 2021. For the year, these annuities totaled $113 billion, more than double the sales in 2021.

Fixed-rate deferred sales represented 36% of the total individual U.S. annuity market. The record demand in December spilled into the new year, with LIMRA research showing a 315% year-over-year increase in pending fixed-rate deferred contracts in January, according to the report. LIMRA is forecasting record sales in the first quarter of this year.

Fixed indexed annuity sales also posted a record quarter and year. In the fourth quarter, sales were $22.3 billion, up 34% from the prior record set in the fourth quarter 2021. For the year, fixed indexed annuity sales totaled $79.8 billion, up 25% from 2021, and 9% higher than the record set in 2019.

Income annuity sales spiked in the fourth quarter as fluctuating interest rates drove investors to lock in favorable payout rates. Single-premium immediate annuity sales increased by 88% year over year to $3.2 billion.

In 2022, SPIA sales were $9.2 billion, 44% higher than in 2021. Deferred income annuity sales shot up 67% to $720 million and for the year, totaled $2.1 billion, up 13%. LIMRA forecasts that income annuity sales grow steadily through 2026.

Registered index-linked annuities posted $10.1 billion in sales in the fourth quarter, down by 2% from the fourth quarter of 2021. Despite lower fourth-quarter results, total RILA sales reached $41.1 billion in 2022, 6% higher than the prior year and a new all-time high for the product line’s sales.

The news was much worse for traditional variable annuity sales, which continued their downward spiral. In the fourth quarter, sales of these products fell by 41% compared to Q4 of 2021, to $12.7 billion. Last year, traditional variable annuity sales totaled $61.8 billion, down by 29% from 2021.

The report noted that given the current economic forecast and competitive pressures, traditional variable annuity sales are not expected to improve significantly over the next several years.