U.S. sales of registered index-linked annuities could continue to rise this year, even as sales of most other types of individual annuities fall.
Analysts at LIMRA made that prediction in a new annuity market trends analysis.
Overall annuity sales performance could return to 2023 levels this year, simply because 2024 sales were so strong, the analysts warn.
But RILAs have enough momentum to scrape up 1% to 3% year-over-year growth, according to LIMRA.
John Carroll, a senior vice president at LIMRA, said investors like the fact that most RILAs offer a mix of protection against losses and the potential for crediting rate growth.
"RILAs' success is due to continued investor uncertainty about the economy," Carroll said. "Momentum is growing for this product line."
What it means: Buying a RILA may be becoming a default strategy for investors who have no idea what will happen to to the investment markets, need more income than a CD or a bond provides, and want some guaranteed protection against falling markets.
The backdrop: The LIMRA analysts estimate that total U.S. individual annuity sales increased to $435 billion in 2024, up 13% from 2023.
Sales of nonvariable annuities, including sales of nonvariable indexed annuities, rose 12%, to $320 billion.
Sales of variable annuities, including RILAs, rose 16%, to $115 billion.
RILA basics: RILAs are annuities with crediting rates linked to the performance of stock indexes, rather than to the performance of funds that resemble mutual funds.
RILAs, which are registered with the U.S. Securities and Exchange Commission, can expose the holder to the risk of investment-related loss of principal. That means the issuer can choose just how much investment risk to absorb and charge a customer separately for any guarantees.
Because RILAs are tied to the performance of stock indexes, issuers can power the crediting rate options by investing in stock index options and related derivatives, instead of hiring a team to choose or manage mutual funds. In theory, that could make a RILA simpler and easier for an insurer to manage.
The RILA market: Seven carriers entered the RILA market in 2024, and the carriers already in the market are upgrading their products, Carroll noted.
Global Atlantic, for example, has just introduced the ForeStructured Growth II RILA contract. The product offers about 50 index-linked strategies.
Global Atlantic ranked 16th in terms of RILA production in the third quarter, with $441 million in new sales, according to LIMRA issuer survey data. The launch of the new product may be a sign that it would like to rise higher.
In December, Transamerica made the Transamerica Structured Index Advantage Annuity NY product available for sale in New York. The product lets clients choose buffers against losses of 10%, 15% or 20%.
Transamerica ranked ninth on the LIMRA RILA production chart for the third quarter, with $969 million in new RILA sales.
Other products: LIMRA analysts think solid stock market performance could help traditional variable annuities do about as well as RILAs this year, after struggling for several years as a combination of stock market volatility and insurers' focus on RILAs took momentum away.
LIMRA expects to see interest rates edge lower.
Lower rates could hurt sales of traditional fixed-rate deferred annuities and income annuities, in spite of relatively new "qualified longevity annuity contract" tax provisions that are eventually supposed to increase retirement savers' interest in income annuities.
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