U.S. Annuity Market Soars to New Heights in 2023

Fixed-rate deferred annuities had their best quarter ever, while traditional variable annuities had the lowest sales ever recorded.

By Rethinking65

The U.S. annuity market witnessed a spectacular performance in 2023, setting a new all-time record. According to LIMRA, the total sales of annuities in the United States surged by 23%, reaching $385 billion.

The growth was fueled by a robust economy and an increasing preference for investments with protected growth, LIMRA said in a press release. The organization includes 700 member organizations, including insurance and annuity providers.

Last year was particularly remarkable for fixed annuity products, which saw unprecedented sales. Bryan Hodgens, the head of LIMRA research, highlighted the exceptional growth in fixed annuities, which reached $286.2 billion, a 36% increase from 2022’s record figures. This surge was driven by investor concerns about potential market downturns and attractive interest rates, leading many to opt for fixed annuity products that offer stable crediting and payout rates, LIMRA said.

In the final quarter of 2023, the annuity market hit another peak, with sales totaling $115.3 billion, marking a 29% increase from the same period in 2022 and surpassing the previous quarterly record set in early 2023.

Fixed annuities outperform

Breaking down the figures, fixed-rate deferred annuities had their best quarter ever, with sales of $58.5 billion in the fourth quarter, a 52% increase from the previous year. Over the year, these annuities totaled $164.9 billion, up 46% from 2022.

Fixed indexed annuities (FIA) also had a banner year, with sales totaling $95.6 billion, a 20% increase from the previous year. Hodgens noted the competitive crediting rates and principal protection from market volatility as key factors making FIAs more attractive. While a slight decline is expected in 2024, sales are predicted to remain strong.

Income annuity products, like single premium immediate annuities (SPIA) and deferred income annuities (DIA), also saw significant increases in sales due to rising interest rates. SPIA sales jumped 43% to $13.2 billion, and DIA sales nearly doubled to $4.1 billion in 2023.

Registered index-linked annuities (RILAs) outperformed traditional variable annuities for the first time, with sales reaching $47.4 billion, a 15% increase from the previous year and setting a new record.

Bad year for VAs

In contrast, traditional variable annuity sales experienced a downturn, marking the lowest sales ever recorded for both the quarter and the year.

“The introduction of RILAs in recent years and expansion of FIAs have offered investors options to buy a product that provides upside investment potential with limited to no downside risk — a value proposition increasingly attractive to today’s investor,” said Hodgens. “That said, LIMRA predicts the continued equity market growth over the next two years will propel traditional VA sales to grow as much as 10% in 2024 from current levels.”

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