Another quarter, another record for annuities.
In the first three months of 2024, annuities enjoyed their highest first-quarter sales ever recorded. Total U.S. annuity sales for Q1 were $113.5 billion, a 21% increase over last year.
"The remarkable sales trends over the past two years continued into 2024," said Bryan Hodgens, head of annuity research at LIMRA, an industry-funded research group that's been tracking the products since the 1980s, in a
The latest haul continues a long hot streak for annuities, insurance products that provide a pension-like income during retirement. Two years ago,
Why are annuities flying off the shelves? The simplest answer is interest rates. To bring down inflation, the
There's also another factor: Time may be running out. As the Fed contemplates lowering rates some time this year, the unusually high yields from annuities could come down at any minute.
"It's a fire sale," said Dennis Huergo, vice president of
In the first quarter of 2024, different types of annuities enjoyed varying levels of success. Leading the pack were fixed-rate deferred annuities, which offer customers a fixed, tax-deferred interest rate. In Q1, FRD sales reached $48 billion — 16% higher than in the same quarter last year.
"Fixed deferred annuities are leading the surge because they pay slightly better rates than CDs but come with multiyear tax deferrals, which can be attractive," Huergo said.
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Also popular were fixed indexed annuities, which follow the performance of an index fund but provide downside protection. From January through March, these products took in $29.3 billion — a record first quarter for the category.
"FIA products continue to offer very competitive crediting rates while protecting the principal investment, an attractive proposition for today's investors," said Hodgens.
Income annuities, which are purchased with a lump sum, also performed well. Single premium immediate annuities, which start payments almost immediately, raked in $4 billion — a 19% jump from the first quarter of 2023. And sales of deferred income annuities, which delay payments until a certain date or event, reached $1.1 billion — up 35% from last year.
Annuities' youngest category, registered index-linked annuities, enjoyed their fourth consecutive quarter of record sales. These relatively new products, similar to fixed indexed annuities, are linked to an index fund but set limits on losses. In the first months of 2024, RILA sales reached $14.5 billion — 40% more than last year.
Even variable annuities, which have not sold nearly as well as other categories in recent years, enjoyed an unusually good quarter. Like RILAs and FIAs, these products are tied to the performance of the stock market — but unlike the others, they do not provide downside protection.
Stung by the stock downturns of 2022 and volatility of 2023, customers largely shunned variable annuities. But amid the upswings of early 2024, sales have started to tick upward.
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"Strong equity market performance over the past year has made traditional VAs more attractive," Hodgens said. "While these products will not command the market share they did 10 years ago, LIMRA predicts the continued equity market growth will propel traditional VA sales to grow as much as 10% in 2024 from current levels."
Where will annuities go from here? Hodgens is encouraged by the latest numbers, but he also sees challenges ahead.
"Favorable economic conditions and rising investor interest in securing guaranteed retirement income have resulted in double-digit sales growth in every product line," he said. "While there are potential regulatory and economic headwinds in the second half of the year, LIMRA expects annuity sales to continue to perform well."
