Giesing noted that LIMRA predicts FIAs will reach record sales levels this year and continue to improve all the way through 2025.
But gains in fixed-annuity sales come as variable annuity sales falter. In the first three quarters of 2022, VA sales fell 25% from the same period a year earlier. Even registered index-linked annuities (RILAs), which are variable annuities that cap growth in return for varying degrees of downside protection, have slumped. They enjoyed greater than 30% annual sales growth for three years running, but now LIMRA is predicting RILA sales will be flat at best for the year. The reason: Their upside is tied to the stock market.
Giesing acknowledged that higher interest rates also create stiffer competition for annuities. Nearly all new fixed-income investments will offer greater yields than before. “With short-term interest rates rising faster than longer-term rates, competitive alternatives such as bank CDs, brokerage CDs, and other options that offer more liquidity may become more attractive for individuals looking for safety,” he said.
But annuities can provide benefits that bonds don't, such as guaranteed income for life. Many also offer riders (for an extra fee), such as a death benefit or long-term-care insurance, that bonds, money market funds and CDs can’t.
“Financial advisors who maybe dismissed FIAs or other similar products in the past probably need to at least take the time to understand the product landscape today and re-evaluate the role some of these products can potentially play in a client portfolio,” said Blanchett.