Total first-quarter annuity sales hit the highest quarterly sales ever, LIMRA reported May 2.
First-quarter sales were $92.9 billion, a 47% increase from the same period in 2022. LIMRA said the results were preliminary.
“Every major fixed-annuity product line experienced at least double-digit, year-over-year (YOY) growth,” said Todd Giesing, assistant vice president, LIMRA Annuity Research, in a press release. “Despite expectations that interest rates will level off, LIMRA is forecasting total annuity sales in 2023 to exceed $300 billion for the second consecutive year.”
Fixed-rate deferred (FRD) annuities were the big winners. Sales were $40.9 billion in the first quarter, 157% higher than the first quarter of 2022. For the fourth consecutive quarter, FRD sales achieved record sales and now represent 44% of the total annuity market. To put this into perspective, LIMRA said, FRD annuity sales represented just 18% of the total U.S. annuity market in the first quarter of 2020.
Giesing noted crediting rates on fixed-rate deferred annuities are outperforming interest rates on certificates of deposit. “LIMRA anticipates FRD products to have strong sales this year even though interest rates are expected to fall in the second half of 2023. While we don’t expect FRD sales to match the record set in 2022, LIMRA is forecasting sales to be above $100 billion in 2023,” he said.
Meanwhile, the worst category was traditional variable annuities, which continued its slide. Traditional VA sales were $12.9 billion in the first quarter, down 30% from first-quarter 2022 results. With market volatility expected to remain high, LIMRA is forecasting sales growth in this category to be flat in 2023, it said.
Another bright spot was fixed-indexed annuities (FIAs). Their sales were also record-breaking for the quarter. FIA sales were $23.1 billion, up 42% from first quarter 2022 results and 4% higher than the record set in the fourth quarter of 2022. “LIMRA is predicting FIA sales to grow as much as 10% in 2023, as investors continue to seek out solutions with a balance of protection and growth,” Geising said.
The income annuity market also reached its highest quarterly sales ever, topping $4.1 billion. Single-premium immediate annuity sales were $3.3 billion in the first quarter, 120% higher than the prior year. Deferred-income annuity sales jumped 125% YOY to $820 million in the first quarter. With investors looking to lock in favorable payout rates before they begin to fall, LIMRA said, it expects the strong sales in the first half of the year to drive income annuity sales to grow at least 15% in 2023.
Registered index-linked annuity (RILA) sales totaled $10.4 billion in the first quarter of 2023, up 8% from the prior year. RILAs are appealing to investors who want a greater return but are willing to accept more downside risk. LIMRA is predicting RILA sales to have another record-breaking year in 2023, likely growing at least 10%.