Fixed Annuity Sales Rocket Higher in Q3

What You Need to Know

LIMRA recorded $80 billion in U.S. individual annuity sales during the quarter.
Fixed immediate annuity sales were strong.
Traditional variable annuity sales fell.

Annuities are like insurance sausage casings stuffed with bonds. Rising interest rates helped insurers improve the filling in the third quarter.

Sales of all U.S. individual annuities increased 27%, year-over-year, to $80 billion, and sales of non-variable individual annuities climbed 75%, to $56 billion, according to new issuer survey data from LIMRA.

Todd Giesing, an assistant vice president with the LIMRA Annuity Research unit, said in a comment, included in the survey results announcement, that insurers have been increasing fixed-rate annuity crediting rates at a time when consumers are looking for a refuge from investment market volatility.

“Our forecast suggests that protection products will continue to propel growth in the annuity market for the next several years,” Giesing said.

What It Means

Some life insurers have backed away from assuming annuity rate risk in recent years, and some are continuing to reduce exposure to rate guarantee risk, in spite of rising rates.

Other insurers seem to be happy to use rising rates on their investments in bonds to add and improve rate guarantees.

For clients and their annuity advisors, the challenge will be understanding which issuers offer fixed-rate guarantees, and how those insurers are managing their exposure to rate guarantee risk.