Meanwhile, income annuities saw their sales return to pre-pandemic levels. LIMRA said for the third quarter, single-premium immediate annuity sales were $2.5 billion, rising 58% over the third quarter of last year, while deferred-income annuities saw $600 million, a rise of 18%.
Overall, single-premium immediate annuities, also known as SPIAs, have seen sales of $6 billion for the first nine months, which is 28% higher than last year. Sales of deferred-income annuities, or DIAs, rose by 3% during that period, with $1.5 billion in sales. Looking ahead, LIMRA expects income annuities to continue this upward trend and grow more than 10% overall for the year and continue to increase until 2026.
Not all annuities have seen the same levels of success, and some have even found it difficult to find their footing in this market. That includes variable annuities, which saw their sales fall 37% to $13.7 billion in the third quarter. That’s the lowest sales have been for VAs since 1995. For the first nine months of the year, variable annuity sales have totaled $48.5 billion, which shows a 25% decrease from the same period last year.
VAs are at a disadvantage more than other annuities because they are based on equities, Giesing said. The stock market continues to suffer, and bad economic news curtails people’s desire to invest in any stock-based products.
“There is not a good outlook going for equities,” he said. “It will be a very challenging environment for those looking to purchase VAs.”
Given the sour prospects, LIMRA anticipates that VA sales will drop more than 20% by the end of the year, Giesing said. He added that it will take them five years to return to the sales levels they enjoyed in 2021, which was $86.6 billion.
While the numbers for the other annuities have been good thus far, Giesing believes that the third quarter will see a peak, and that the overall sales numbers will start to cool in the fourth quarter. The reason is that short-term interest rates are starting to rise, and if other interest-rate based products start to compete with fixed annuities, investors may take their money outside the annuity world.
“If we get to a point where the short-term rates rise more rapidly and you can get six months or one-year rates that are more competitive than what we're seeing currently with the fixed-rate deferred market, that may temper this growth,” he said.