For the past year and a half, annuities have been breaking record after record. Now, after the products'
In the first quarter of 2023, total annuity sales reached $92.9 billion, according to
"The momentum of the train kept going from 2022," said Todd Giesing, director of annuity research at LIMRA. "When we look at the first quarter and how strong it was, this is definitely going to drive what happens for the remainder of the year."
Annuities — complex insurance products that provide a pension-like income in retirement — were already on a roll by the end of last year. The products tend to sell better in times of economic uncertainty, and 2022 was marked by both runaway inflation and a volatile stock market. By the end of the year, total annuity sales had hit $310.6 billion, shattering the previous yearly record that had been set during the financial crisis of 2008.
As 2023 began, the economy showed some signs of improvement. Inflation, which had climbed to 9.1% last June, was
"People still have concerns around the economy, and they're seeking out protection," Giesing said.
This desire for safety was clearly a factor in which products sold the most. Fixed-rate annuities, which deliver a minimum rate of return regardless of what the stock market is doing, were particularly popular. Specifically, fixed-rate deferred annuities drew in $40.9 billion last quarter, 157% more than in the first quarter of 2022 and a new record for the category. Fixed-indexed annuities reached a new peak as well, with $23.1 billion in sales.
The story was different for variable annuities, which are tied to an investment portfolio — typically including stocks. Traditional variable annuity sales sank to $12.9 billion, 30% less than in the same quarter last year.
"Fixed annuities are booming, and variable annuity sales are continuing to decline," said David Lau, the founder of
Other categories enjoyed their best quarter to date. Income annuities, which begin paying out immediately after purchase, reached an unprecedented $4.1 billion in sales. Within that group, single-premium immediate annuities — which are purchased with a single lump sum — took in $3.3 billion, 120% more than in last year's first quarter. And deferred-income annuity sales reached $820 million, a 125% jump from 2022.
In the middle were registered index-linked annuities (RILA). These relatively new products, which entered the market in the 2010s, are linked to index funds but set a limit on losses from stock downturns. RILA sales totaled $10.4 billion in the first quarter of 2023, up 8% from 2022 — a solid result, but not a new record for the category.
In a way, this middling performance fit an overall pattern for annuities last quarter: The more safety from the stock market, the better the sales.
"What you're seeing across the board is the use of protection," Lau said. "Nobody wants to go into variable annuities. … People are looking for more of the safety and stability of the fixed products."
Over the past few years, some wealth managers say their clients have expressed more interest in these products as the economy endured multiple crises.
"We have seen a significant increase in clients asking about and purchasing annuities," said Kris Etter, a principal of
So if the economy improves, will annuity sales suffer? Giesing doesn't think so. If inflation continues to cool and the stock market continues to improve, he said, customers may shift from fixed annuities to variable ones. But in the long run, he expects sales to continue booming.
"The momentum that started in 2022, I think, is going to help carry the industry over the next five years," Giesing said, "with 2023 being very strong and potentially challenging the year we had last year — but it'll be close."
