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Life Health > Annuities

Income Annuities Emerged From the Shadows in Q1

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Sales of most types of individual annuities soared in the first quarter, according to preliminary issuer survey results from LIMRA.

Total sales of individual annuities increased 47% between the first quarter of 2022 and the latest quarter, to $93 billion.

Sales of traditional variable annuities fell 30%. But sales of a second type of variable annuity, the registered index-linked annuity, rose 8%, and sales of fixed annuities climbed 98% And sales of two types of annuities that clients can use to convert payments directly into a lifetime stream of income payments — income annuities — soared.

Sales of fixed immediate income annuities, which begin to pay benefits quickly, rocketed up by 120%, and sales of deferred income annuities, which begin to pay benefits at a later, scheduled date, took off on an even more powerful rocket, rising 125%. Deferred income annuity sales might have been helped by the publicity surrounding passage of the Secure 2.0 package, which includes provisions intended to promote use of deferred income annuities.

Economists have sometimes written papers about why income annuity use has been much lower than economists think it should be. Higher rates and increased interest in lifetime income arrangements could be starting to turn the sales spotlight in income annuities’ direction.

What It Means

For you and your clients, the new LIMRA numbers mean that annuities are hot.

For economists thinking about how rising interest rates and worries about bank failures will affect financial institutions, the new numbers may mean that some of the cash that has been sitting quietly in banks is now moving into annuities.

For analysts watching insurers, the big question is whether the money in cash-value life insurance policies and annuities offering relatively low rates of return will move, or is already moving, into products offering higher rates.

The Data

LIMRA is a Windsor, Connecticut-based organization that helps financial services companies gather and share performance data and other information.

Here’s a look at what happened to the sales of the types of annuities LIMRA tracks between the first quarter of 2022 and the first quarter:.

Annuity Type Q1 2023 Sales Q1 2022 Sales Change
Fixed-rate deferred $40.9 billion $15.9 billion +157.0%
Fixed deferred income $800 million $370 million +125.0%
Fixed immediate $3.3 billion $1.5 billion +120.0%
Non-variable indexed.. $23.1 billion $16.3 billion +42.0%
Structured settlement.. $1.5 billion $1.2 billion +30.0%
Registered index-linked.. $10.4 billion $9.6 billion +8.0%
Traditional variable $12.9 billion $18.5 billion -30.0%


Why the Shift

Traditional fixed-rate deferred annuities are now offering crediting rates that are higher than typical bank certificate of deposit rates, and that makes traditional fixed-rate annuities attractive to investors who want to avoid market risk, according to Todd Giesing, a LIMRA annuity research executive.

(Photo: Adobe Stock)


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