Overall, U.S. annuity sales increased by 16% to $79.4 billion in the second quarter, per LIMRA’s U.S. Individual Annuity Sales survey, which accounts for 90% of the market. Fixed-rate deferred annuities (FRDs), which are currently posting their best quarterly performance ever, are leading the pack. Sales totaled $28.7 billion, up 79% from the previous year. In a news release, Todd Giesing, assistant vice president of LIMRA Annuity Research in Windsor, Conn., noted, “All fixed products exhibited favorable growth.”
Investments that are safer and don’t go down in price Giesing noted that the record numbers were because people were trying to get away from risky stocks, which was helped by the fact that interest rates were rising. “With typical returns for fixed-rate deferred annuities at or above 3%, it’s a rate environment we haven’t seen in a long time,” Giesing observed. Due to the lack of liquidity, annuitants of fixed-rate deferred annuities receive a lump sum payment at the end of the contract rather than an income stream over a specified period. However, the annuity still provides a fixed annual percentage yield and tax-deferred growth. According to Jason Branning of Branning Wealth Management in Ridgeland, Mississippi, “Fixed annuity rates have changed quickly this year because the 10-year Treasury rate has gone up.” Many investors are drawn to fixed annuities because of the security of their principal and the competitive interest rates that are now being offered. Fixed annuities continue to offer higher yields than many bonds with comparable risk profiles.” Cyrus Bamji, in charge of communications at the Alliance for Lifetime Income in Washington, D.C., said that every day, thousands of Americans retire, and most don’t know what will happen with their money. “There’s more going on than just a flight to safety. It’s a flight to safety,” Bamji explained. Ranking the Carriers According to Giesing, “those having a wide portfolio of annuity product offerings” were the most successful carriers during the quarter. That makes perfect sense to some industry observers. Frank O’Connor, vice president of research at the Washington, DC-based Insured Retirement Institute, “larger carriers offering multiple annuity lines can leverage shifts in product desirability and channel activity” because they provide the majority or all types of annuities and have a presence across all channels. New York Life was the top seller of all forms of annuities in the third quarter, with $11.2 billion in annuity sales. AIG Cos. was the second highest seller, at $9.7 billion. This was followed by Jackson National Life ($8.2 billion), Equitable Financial ($7.7 billion), and Massachusetts Mutual Life ($8.3 billion). Regarding variable annuities, Jackson National was likewise the market leader. An Inside Look at RILAs The second most popular type of annuity during the quarter was registered index-linked annuities (RILAs), a variable annuity (VA) that gives owners a proportion of market index gains and restricts losses. While RILAs are tied to an equity index, they protect against losses while allowing for significant gains. That mix has helped them become extremely popular in recent years. For the second quarter, RILA’s sales hit a record high of $10.8 billion, up nearly 8% from last year. They currently account for 40% of the VA’s total revenue.
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Carl Wyllie is an advisor focused in areas of Medicare, retirement, estate planning, and crisis planning. Carl works with individuals of all ages in planning for their retirement. He is uniquely effective in building working relationships between their families and elder care law attorneys to assist them in avoiding a healthcare crisis. Carl is particularly sensitive to helping provide the means for his clients to maintain their independence and dignity when a change in their health occurs due to the natural aging process.
