Total annuity sales increased 12% year-over-year to $88.6 billion in the second quarter 2023, driven by record-high registered index-linked annuity (RILA) and fixed indexed annuity (FIA) sales, according to preliminary results from LIMRA’s U.S. Individual Annuity Sales Survey released this week.
“Double-digit equity market increases and stable interest rates have prompted investors to seek out greater investment growth opportunity through RILAs and FIAs,” said Todd Giesing, assistant vice president, LIMRA Annuity Research. “Economic conditions continue to be favorable for the annuity market. LIMRA is forecasting a strong second half of the year and expects 2023 sales to potentially surpass the record sales set in 2022.”
In the first half of 2023, total annuity sales jumped 28% to $182.7 billion. This marks the highest sales ever recorded in the first six months of a year. Following record-high sales in 2022, total first quarter annuity sales were $92.9 billion, a 47% increase from the prior year.
RILA sales totaled $11.6 billion in the second quarter of 2023, up 8% from the prior year. These are the highest quarterly sales for the product line. The strong equity market performance attracted investors who are seeking a greater return on their investment and are willing to accept some of the downside risks. In the first half of 2023, RILA sales were $22 billion, 8% higher than the same period in 2022. LIMRA is predicting RILA sales to have another record-breaking year in 2023, likely increasing at least 10%.
For the fifth consecutive quarter, FIA set a sales record. FIA sales were $25.4 billion in the second quarter, up 29% from the prior year’s results. Year-to-date (YTD), FIA sales jumped 35% to $48.5 billion.
“FIA products offer an appealing combination of investment growth with principal protection. With cap rates nearing or exceeding 10%, there are few investment options that can offer a higher potential guaranteed return with full principal protection,” said Giesing. “Like RILAs, favorable economic conditions could push FIA sales beyond our expectations in 2023.”
The income annuity market achieved its highest quarterly sales ever, topping $4.5 billion. Single premium immediate annuity (SPIA) sales were $3.4 billion in the second quarter, 68% higher than the prior year’s results. In the first six months of 2023, SPIA sales shot up 93% to $6.8 billion.
Deferred income annuity (DIA) sales reached a milestone, topping $1 billion for the first time in a quarter. DIA sales were $1.1 billion, more than doubling (108%) sales in the second quarter 2022. In the first half of the year, DIA sales jumped 116% to $1.9 billion.
“The remarkable growth of income annuity product sales is a result of broad growth across the industry,” said Giesing. “Reports in the second quarter that the Federal Reserve was expected to slow interest rate hikes likely prompted investors who had been sitting on the fence to lock in the favorable rate of returns offered.”
As expected, fixed-rate deferred (FRD) annuity sales fell from the record high $41.5 billion set in the first quarter. In the second quarter 2023, FRD sales were $31.7 billion, which was a 24% drop from prior quarter but 10% higher than second quarter 2022 results. YTD, FRD sales totaled $73.2 billion, up 64%, which represents the highest FRD sales in a six-month period.
“While the average FRD annuity crediting rates continue to outperform CD rates, the gap has diminished. Investors — feeling more confident in the economy — are shifting to RILAs and FIAs seeking greater returns,” said Giesing. “That said, with a significant amount in FRD contracts coming out of surrender this year, LIMRA expects a portion of those assets to be reinvested in FRD products driving total FRD sales to another strong year.”
The steady rise in the equity markets prompted a slight uptick in traditional variable annuity (VA) sales from the first quarter, but traditional VA sales remain far below the results from the prior year. Traditional VA sales were $13.6 billion in the second quarter, down 18% from second quarter 2022 results. YTD, traditional annuity sales totaled $26.4 billion, falling 25% compared with the same period in 2022. While economic conditions are improving for traditional VA products, with the slow start to the year, LIMRA is forecasting sales growth in this category to be flat in 2023.
Preliminary second quarter 2023 annuity industry estimates are based on monthly reporting, representing 83% of the total market. A summary of the results can be found in LIMRA’s Fact Tank.
Second quarter 2023 top 20 rankings of total, variable and fixed annuity writers will be available in mid-August, following the last of the earnings calls for the participating carriers.
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RILA sales will eclipse FIA inside of 3 years. I have no doubt on that.
Why aren’t indexed VULs as popular as RILAs?
Can't use your retirement account to buy a VUL.
True, but the tradeoff is that the RILA is pre-tax and the VUL is post-tax. Thanks to the SECURE 2.0 we are going to be seeing more RILAs and VULs come to market which should lead to innovative crediting strategies.View attachment 10069
It's not a trade off. It just is what it is.
65yo has 2m in their retirement account, they're already stuck there.
35yo can put away an additioal 5k/mo, great for VUL.
Guess which one is more common.
Most RILA are already qualified lump sums that can't be rolled into life insurance. The rest of RILA are lump sums of after tax money that also can't easily go into a VUL without causing it to be a MEC or require ongoing funding like many life contacts will.