In the second quarter of 2021, annuity sales were off the charts.

"Our preliminary second quarter numbers are the highest we have seen since the fourth quarter of 2008, and the third-highest quarter on record," said Todd Giesing,  assistant vice president and head of annuity research at Windsor, Conn.-based Secure Retirement Institute (SRI).

Every quarter, SRI releases annuity sales data. But this release was particularly surprising to some, given the backdrop of the pandemic. Total annuity sales for the quarter jumped 39% from the corresponding period a year earlier, led by variable annuities (VAs), which surged 55%; fixed annuity sales rose 27%.

"As business continued to open up, Americans likely started to get back to a more normal mindset, bringing factors such as retirement and income planning discussions back to the table," said Giesing.

Coming Off A Terrible Year
While that's no doubt true, it's also worth noting that the previous year's figures were particularly bad. In 2020, second quarter sales dropped 24% year-over-year, with VA sales down 20% and fixed annuities off by 26%. That, of course, was at the height of pandemic panic, a time when equity markets plummeted some 30% amid a near-total economic shutdown. From there, annuities sales practically had nowhere to go but up. They were bound to rebound.

Still, some advisors insist that last year's drastic drop-off doesn't completely explain this year's quarterly uptick. "While the pandemic may have suppressed some 2020 sales, financial professional continued to serve their clients remotely," observed Paula Nelson, co-head of individual markets at Global Atlantic.

Rather, Nelson argued that the sales increase reflects a growing appetite for what annuities offer—particularly, their advantages over fixed income securities. "The sustained, long-term duration of the low-rate environment is reaching a critical point for people saving for retirement, and they are looking to annuities as a meaningful alternative, offering growth potential and tax deferral," she said.

A Groundswell Of Demand
Frank O'Connor, vice president of research and outreach at the Insured Retirement Institute in Washington, D.C., concurred. "More Americans are reaching retirement age every day, so there is a groundswell of demand for guaranteed income and principal safety," he said. At the same time, he added, it's "very difficult to find yield anywhere in fixed income [markets] without going to riskier investments such as junk bonds."

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