Thanks in large part to record-breaking fixed annuity sales, total annuity sales jumped 22% to $310.6 billion in 2022, a 17% hike over the sales record set in 2008, according to preliminary results from LIMRA’s U.S. Individual Annuity Sales Survey released today.
Fourth quarter total annuity sales also broke records, soaring to $87.2 billion, a 39% increase from the fourth quarter of 2021. This marks the third consecutive quarter in which annuity sales set a new record, LIMRA reported.
“Investors seeking guaranteed growth and downside protection drove extraordinary fixed annuity sales,” Todd Giesing, assistant vice president, LIMRA Annuity Research, said in a release.
The sale of fixed-income annuities surged to $208 billion, 49% above the record set in 2019. The fixed contracts accounted for about two-thirds of all annuities sold in 2022, LIMRA found.
“Fluctuating interest rates in the fourth quarter prompted investors to lock in crediting and payout rates while they were high. Our forecast suggests that protection products will continue to boost growth in the annuity market for the next several years,” Giesing added.
This also marks the third consecutive quarter in which total annuity sales set a new record, as investors who want stable income and earnings sought the safety of guaranteed returns, LIMRA noted.
Total fixed-rate deferred annuity sales were $37.5 billion in the fourth quarter, 241% higher than fourth quarter 2021 sales. This is the best sales quarter for fixed-rate deferred annuities ever documented.
Last year also marked the best sales quarter and year for fixed-rate deferred annuities ever documented. Total fixed-rate deferred annuity sales hit $37.5 billion in the fourth quarter, 241% higher than fourth quarter 2021 sales.
“For the year, fixed-rate deferred annuities [sales] totaled $112.1 billion, more than double (111%) the sales in 2021. This is 38% above the previous annual high of $80.8 billion set in 2002,” LIMRA reported.
A fixed deferred annuity allows for periodic or lump-sum contributions and provide returns comparable to CDs. In addition to offering tax deferred growth, fixed indexed annuity (FIA) sales also had a record quarter and year. In the fourth quarter, FIA sales jumped 32% to $21.9 billion.
This beats the previous quarterly sales record set last quarter. Total FIA sales in 2022 were $79.4 billion, up 25% from 2021, and 8% higher than the record set in 2019, LIMRA said.
With a fixed indexed annuity, investors’ money is not invested directly in the market, but have the potential to earn interest tied to, but less than, an index such as the S&P 500’s performance, in exchange for providing a guarantee that limits investment downside.
“Current economic conditions are ideal for the FIA market. Insurers have been able to offer very competitive crediting rates while protecting the principal investment from equity market volatility, making FIA products more attractive to investors for the foreseeable future,” Giesing said
“In 2023, LIMRA is forecasting FIA sales to experience moderate increases, as investors continue to seek protection and growth opportunity. We expect this growth to continue through 2025,” he added.
Registered index-linked annuity (RILA) sales lost some of their steam in 2022, but still managed to hit $9.9 billion in the fourth quarter, down 4% from the fourth quarter 2021.
“Despite lower fourth-quarter results, total RILA sales reached $40.9 billion in 2022, 6% higher than prior year and a new all-time high for the product line’s sales,” LIMRA said.
Meanwhile traditional variable annuity (VA) sales stumbled, falling 42% in the fourth quarter to $12.6 billion.
Overall in 2022, VA sales totaled $61.7 billion, down 29% from 2021 results.
For perspective, annual traditional VA sales peaked at $184 billion in 2007. Given the current economic forecast and competitive pressures, there is little expectation that sales will improve significantly over the next several years, LIMRA predicted.
Higher interest rates also spurred growth in the income annuity market, LIMRA said. Single premium immediate annuity (SPIA) sales hit $3.1 billion in the fourth quarter, a year-over-year increase of 94%, LIMRA said. Overall for 2022, SPIA sales hit $9.1 billion, 44% higher than 2021 results.
In the fourth quarter, deferred income annuity (DIA) sales skyrocketed by 59% to $720 million. For the year, DIA sales were $2.1 billion, up 24%. Income annuity sales should experience steady growth through 2026, LIMRA predicted.