U.S. annuity sales had a modest sales increase in the first quarter, as both traditional variable annuities and registered index-linked annuities slumped after  record sales last year, according to Limra.

The Limra U.S. Individual Annuity Sales Survey showed annuity sales increased 4% to $63.3 billion, driven by fixed-indexed annuity (FIA) and fixed-rate deferred annuity (FRD) sales growth.

Todd Giesing, assistant vice president, Limra annuity research, said FIA and FRD sales benefited from rising interest rates and increased market volatility, as investors sought protected growth options.

“When you combine the rise in equity market volatility with the fact that interest rates were rising during the quarter, this was the perfect storm for success for fixed-rate deferred annuities as well as fixed-indexed annuities, which provide the backstop of principal protection and growth potential,” he said.

Limra said fixed annuity sales overall rose 14% in the first quarter to $35.2 billion, with all fixed products except income annuities recording positive growth. FIA sales were $16.3 billion, 21% higher than first quarter 2021 results. LIMRA is predicting FIA sales to grow as much as 10% by year-end.

Fixed-rate deferred annuity sales increased 9% in the first quarter, year-over-year, to $15.9 billion. LIMRA is forecasting as much as 7% growth this year; and immediate income annuity sales were $1.5 billion in the first three months of the year, the same as prior year.

Deferred income, however, fell 14% year-over-year to $365 million in the first quarter. But Limra predicts deferred income annuity sales to increase as much as 15%, as interest rates are expected to continue to rise throughout the year.

As for VAs and RILAs, the double-digit increases that they had been posting for a while halted, as volatility in the equity market continues, Giesing said. “This is a common trend we have seen as equity market volatility spikes, where investors seek out protection-based solutions,” he said.

Total variable annuity sales fell 6% in the first quarter to $28.1 billion. Traditional VA sales were down 11% year-over-year to $18.5 billion in the first quarter. Limra is projecting an 8% increase by the end of the year.

And RILA sales had a modest growth of 5% to $9.6 billion in the first quarter. Limra expects sales to jump as high as 30% by year-end.