Total preliminary U.S. annuity sales were $67.9 billion in the second quarter, up 39% from second quarter 2020. Year-to-date, annuity sales were $129 billion through the first six months, 23% higher than prior year, according to preliminary results from the Secure Retirement Institute U.S. Individual Annuity Survey, released July 27.
“Strong equity market gains and lower volatility, as well as rising interest rates all contributed to the remarkable rebound in the annuity market,” said Todd Giesing, assistant vice president, SRI Annuity Research. “We expected sales to improve as the country opened up and the economy normalized. There is significant pent up consumer demand for products providing tax-deferred investment growth and guaranteed income. The last time quarterly annuity sales surpassed this level was fourth quarter 2008, during the Great Recession.”
Total variable annuity (VA) sales were $32.8 billion in the second quarter, up 55% from prior year. This represents the highest quarterly VA sales in nearly six years. In the first six months of 2021, total annuity sales were $62.8 billion, 33% higher than prior year.
Traditional VA product sales benefited from the strong market growth and low volatility. In the second quarter, traditional VA sales were $22.7 billion, a 37% increase from second quarter 2020. Year to date, traditional VA sales totaled $43.6 billion, up 16% from prior year.
“In addition to favorable economic conditions, sales of traditional VA products, which offer tax-deferred investment options, may have been boosted this quarter in response to the current administration’s proposed tax plan, which, if enacted, would retroactively raise capital gains rates,” noted Giesing.
Registered index-linked annuity (RILA) sales exceeded record level sales in the second quarter, to $10.1 billion, a 122% jump from second quarter 2020. For the first half of 2021, RILA sales were $19.3 billion, 105% higher than prior year.
“While the current market continues to favor RILA products, we expect RILA sales growth to level off in the second half of the year,” said Giesing. If interest rates improve, fixed indexed annuities may become more attractive to investors who want greater principal protection.”
Fixed indexed annuity (FIA) sales grew 28% in the second quarter to $15.4 billion. Year to date, FIA sales were $28.9 billion, up 2% from prior year.
“While the FIA market hasn’t returned to the levels seen in 2019, rising interest rates and product innovation enabling carriers to raise cap rates suggest FIA sales will continue to improve throughout 2021. SRI is forecasting FIA sales to increase more than 5% in 2021.
Fixed-rate deferred annuity sales were $16.1 billion in the second quarter, 26% higher than prior year results. This represents the highest quarterly sales results for fixed-rate deferred annuities since second quarter 2009. In the first six months of 2021, fixed-rate deferred annuity sales totaled $30.7 billion.
“Sales of fixed-rate deferred annuities in banks and broker-dealers continue to thrive as crediting ratings for them are far more attractive than CDs or other similar investment products,” Giesing said. “However, SRI saw pending contracts in June drop by double-digits, signaling sales are likely to level off or decline in the second half of 2021.”
Immediate income annuity sales were $1.8 billion in the second quarter, up 29% from second quarter 2020. Year to date, immediate income annuity sales were $3.3 billion, level with prior year results.
Deferred annuity sales increased 52% to $540 million in the second quarter. While improved, interest rates remain very low, undermining interest in income annuity products. In the first half of 2021, DIA sales were $1 billion, 17% higher than prior year.
Total fixed annuity sales rose 27% in the second quarter to $35.1 billion. Year to date, total fixed annuity sales were $66.2 billion, 15% above the first half of 2020.
Preliminary first quarter 2021 annuities industry estimates are based on monthly reporting, representing 85% of the total market. A summary of the results can be found in LIMRA’s Fact Tank.