Consumers are flocking to annuities. And that’s expected to continue as recession fears linger, according to an executive at Athene, an insurance company based in West Des Moines, Iowa.

“People are a little fearful of keeping their money in equities and having all that risk exposure, and buying annuities is absolutely a way to take some of that risk off the table,” said Adam Politzer, chief product officer at Athene.

He said the company’s annuity sales are the best it has seen in more than a decade and that this has been driven by the higher yield environment. Athene offers what it calls a “spread-based product,” which means that its annuities are manufactured by investing in other fixed-income instruments. “And because we can get a higher yield on those, that just means we can turn around and build a better, higher-yielding product today than we have historically,” Poltizer said.

He noted that the fixed-income marketplace particularly is doing well. It had a record year in 2022 and the momentum has continued into this year, he said. 

Preliminary results from Limra’s U.S. individual annuity sales survey showed that annual sales of fixed-income annuities in 2022 surged to $208 billion, a 49% jump over the record set in 2019. Fixed-income annuities accounted for about two-thirds of all annuities sold in 2022, the survey found.

Politzer pointed out that much of the popularity of fixed-income annuities of late is driven by the multiyear guaranteed annuity (MYGA)—which he called the simplest form of annuity. With this product, the customer is guaranteed a rate for a predetermined period, usually five years with a guaranteed 5% return. “Those rates are just so far ahead of other simple fixed rates that you can get in the marketplace,” he said.

He said the advantages of annuities over other fixed-rate products like CDs and bonds boils down to three things: First, annuity carriers are able to make real guarantees. Second, contract holders do not pay taxes until the product matures, and even then, they can roll it into other products. And third, those guarantees not only extend to the amount of money the customer can get in total, but they can also be tied to longevity. “So we can offer guarantees based on the entire lifetime of our customers,” he said.

Politzer pointed to a June 2022 survey by Athene finding that among those saving for retirement, 75% of annuity owners believe they are on track to reach their retirement goals, while only 49% of those not holding annuities said the same thing.

The survey revealed that the percentage of annuity holders is much higher for those who work with a financial professional. About 40% work with an advisor while only 6% of annuity holders have never worked with an advisor, he said.

“There is a lot of uncertainty among people who are not confident that they are doing the right thing with their money as it refers to retirement,” Politzer said, adding that the advisor provides that comfort.    

A recent report by Cerulli said that while sales of fixed annuities will remain strong as market volatility and economic instability continues, there will be stiff competition among fixed annuities, fixed-indexed annuities (FIAs), and registered index-linked annuities (RILAs) during the next five years.

Cerulli said that as interest rates decrease over time, the market share of fixed-index annuities as a percentage of total annuity sales will increase and reach 26% by 2027, followed closely by RILAs (23%) and traditional fixed annuities (20%).

RILAs, the report said, had record sales growth over the past several years that far outpaced that of all other annuity types. But amid rising interest rates, traditional fixed annuities and FIAs have closed the gap. “These conditions will bear watching in 2023 and 2024,” Cerulli said.