Fourth-quarter variable annuities sales increased to pre-Covid levels thanks to the brisk sale of registered index-linked annuities (RILA), which increased 4% over 2020 to $27.9 billion, according to preliminary results from the Secure Retirement Institute.

According to the group’s U.S. Individual Annuity Sales Survey, RILA sales were $8.3 billion in the fourth quarter, a 68% jump from fourth quarter 2019 and 33% higher than the $6.3 billion recorded in third quarter 2020.

In 2020, RILA sales were $24 billion, up 37% from 2019 sales. RILA sales represented a nearly quarter of all VA sales in 2020.

“Current economic conditions have made RILA products uniquely attractive to consumers seeking both downside protection and investment growth, drawing new manufacturers to the market,” Todd Giesing, senior annuity research director at SRI said in a statement. “Instead of new entrants cannibalizing market share from existing manufacturers, we saw strong sales growth for RILA products across the industry driving fourth quarter VA sales and overall industry sales to reach pre-pandemic levels.”

Total annuity sales were $58.7 billion in the fourth quarter, 2% above fourth quarter 2019 sales. Fourth-quarter results, however, couldn’t overcome the steep drops experienced earlier in the year. In 2020, overall annuity sales dropped 9% to $219.1 billion.

Indexed year-end total VA sales were $98.9 billion, down 3% versus 2019.

While interest rates continue to improve through the fourth quarter, the 10-year treasury rate ended the year at 0.93%, a 95 basis point drop from the start of the year.

“This has a significant impact on guaranteed living benefits, and fixed indexed and income annuity product sales in the fourth quarter and for the year,” SRI said in a news release.

In the fourth quarter, fixed-indexed annuity (FIA) sales were $14.3 billion, down 15% compared with fourth quarter 2019 results. After record-breaking sales in 2019, FIA sales fell 24% to $55.7 billion in 2020.

Income annuity products also continued to struggle under persistent low interest rates, SRI said. Immediate income annuity sales were $1.6 billion in the fourth quarter, a 24% drop from fourth quarter 2019. For the year, immediate income annuity sales totaled $6.3 billion, falling 36% compared with 2019 sales levels.

Fourth-quarter deferred income annuity (DIA) sales were $460 million, 13% lower than prior year. In 2020, DIA sales were just $1.7 billion, a drop of 31% from 2019.

Low interest rates had little impact, however, on fixed-rate deferred annuity sales, according to the institute. Fixed-rate deferred annuity sales were $13.3 billion in the fourth quarter, up 41% from prior year. In 2020, fixed-rate deferred annuity sales totaled $51.7, a 9% increase from 2019 results and the highest fixed-rate deferred annuity sales recorded since the Great Recession.

“Continued market uncertainty made fixed-rate deferred products attractive for investors looking for safe, short-term investment growth,” Giesing remarked. “Currently, banks and broker dealers have limited alternatives because there are few protection products that can offer the same return on investment as fixed-rate deferred annuities. On average, the 3-year fixed-rate deferred crediting rates are double the 3-year CD rates being offered.”

Total fixed-annuity sales were $30.8 billion in the fourth quarter, even with prior year’s results. For the year, overall fixed-annuity sales were $120.2 billion, a 14% decline compared with 2019 sales.  

Preliminary fourth quarter 2020 annuities industry estimates are based on monthly reporting, representing 86% of the total market. The top 20 rankings of total, variable and fixed annuity writers for 2020 will be available around mid-March, following the last of the earnings calls for the participating carriers, SRI said.