Annuity sales set to break records from 2023

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Over the past year and a half, pensions have broken one record after another. After the best selling year in the product’s history, now they’ve broken another: best quarterly sales ever.

In the first quarter of 2023, total annuity sales reached $92.9 billion, according to the company. Limlais an industry-funded researcher who has been tracking products since the 1980s. This total is up 47% from Q1 2022.

“Train momentum continues into 2022,” said Todd Giesing, director of pension research at LIMRA. “Looking at the first quarter and how strong it was, this will definitely dictate what happens in the rest of the year.”

Annuities — complex insurance products that provide an annuity-like income upon retirement — were already doing well by the end of last year. Commodities tend to sell well in times of economic uncertainty, and 2022 was marked by both runaway inflation and volatile stock markets. By the end of the year, total annuity sales reached $310.6 billion, breaking the previous annual record set during the 2008 financial crisis.

As 2023 began, the economy showed signs of improvement. Inflation, which rose to 9.1% in June last year, up to 5% March.And stocks — albeit volatile — rebounded with the S&P 500. 7.5% increase in the first three months of the year. Investors remained concerned, however, with many flocking to the relative stability of pensions.

“People are still concerned about the economy and want protection,” Giesing said.

Clearly, this desire for safety is the reason why the product sells the most. Fixed annuities, which offered the lowest interest rate regardless of stock market movements, were particularly popular. Specifically, fixed-rate deferred annuities earned him $40.9 billion in the last quarter, up 157% from the first quarter of 2022, setting a new record for the category. Fixed index annuities also hit a new peak, with sales at his $23.1 billion.

Variable annuities tied to investment portfolios are a different story and typically include equities. Traditional variable annuities sales fell to $12.9 billion, down 30% from the prior year period.

“Fixed annuities are booming and variable annuity sales continue to decline,” said founder David Lau. DPL Financial Partner, talk to your financial advisor about commission-only insurance products. “This is very unusual. The industry has been led by variable annuities for a very long time, until last year or so.”

Other categories had their best quarters to date. Income annuities, which pay off immediately after purchase, hit an unprecedented $4.1 billion in sales. Among that group, single premium immediate annuities purchased with a single lump sum received $3.3 billion, up 120% from the first quarter last year. Deferred Income Annuities sales also reached $820 million, up 125% from 2022.

In the middle was an Index Linked Annuity (RILA) registered. These relatively new products entered the market in the 2010s and are linked to index funds, but with limits on losses due to stock price declines. RILA’s first quarter 2023 revenue totaled $10.4 billion, up 8% from 2022. This is a solid result, but not a new record for this category.

In some ways, this middling performance fits with the overall pattern in pensions last quarter. In other words, the more security you have from the stock market, the better your sales.

“What we see across the board is the use of protection,” Lau said. “No one wants to join a variable annuity. People want more security and stability in fixed products.”

Some wealth managers say their clients are showing more interest in these products as the economy has endured multiple crises over the past few years.

“We have seen a significant increase in clients inquiring about and purchasing annuities,” said Principal Chris Etter. beacon financial planner in Houston, Texas. “I think the COVID recession in February 2020 has caused a wave of people to realize they can’t afford the rollercoaster of a market nearing or in retirement. , another wave came as interest rates rose to combat inflation, crushing entire portfolios not built to withstand market volatility.”

So if the economy improves, will pension sales decline? Giessing doesn’t think so. If inflation continues to fall and the stock market continues to improve, clients may shift from fixed annuities to variable annuities, he said. But in the long run, he expects sales to continue to soar.

“We believe the momentum that started in 2022 will help sustain the industry over the next five years.”

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