People keep buying annuities at a rapid pace

Sales dipped slightly during the third quarter compared with the second, a report finds, but the year is still on pace to be the biggest since 2008.

Annuity sales continued on a tear through the third quarter, keeping pace for the best year-to-date figures since 2008, figures published Tuesday by Limra’s Secure Retirement Institute show.

Sales of contracts were down slightly from the second quarter, but they were nonetheless higher than sales during the third quarter of 2020. As in other recent quarters, it was a story about variable annuities, and registered index-linked annuities in particular.

For the first nine months of the year, overall annuity sales were 19% higher than in the same time frame in 2020. That was led by VAs, sales of which were 32% higher, and particularly by a recent industry favorite that is a subset of those products — RILAs.

Those products, also known as buffered annuities, saw sales year-to-date that were 81% higher than during the first nine months of 2020, according to the Secure Retirement Institute. RILAs have been in high demand because they provide potential for equity market returns but also offer some protection against losses. While RILAs have limited growth potential, the floor on negative returns for account values has helped sales amid the market volatility.

“The surge of the Delta variant pulled overall sales down from second quarter results but continued equity market gains and low volatility propelled double-digit growth in both traditional variable annuity and registered index-linked annuity sales, resulting in strong year-over-year results,” Todd Giesing, assistant vice president of annuity research at the group, said in an announcement.

Meanwhile, traditional VAs saw stronger-than-expected sales, fueled by investment-focused and fee-based products, according to the Secure Retirement Institute. Traditional VAs raked in $21.5 billion during the third quarter, up 22% from the third quarter of 2020.

RILAs, by comparison, saw $9.2 billion in sales, a 47% increase from the same quarter a year earlier.

Sales across all types of annuities totaled $62.2 billion for the third quarter and $191.4 billion for the first nine months of the year, according to the report. Last year, sales during those time spans were $55.7 billion and $160.4 billion, respectively.

Among fixed annuities, sales of fixed-rate deferred products were $41.9 billion for the first nine months, up by 9% from that period in 2020, according to the report. Indexed annuities brought in $47.1 billion, up by 14%, while deferred income annuities saw sales of $1.5 billion, up 19%. Meanwhile, demand for fixed immediate annuities and structured settlements were down by 6% and 15%, with sales of those products totaling $4.4 billion and $3.2 billion, respectively.

CUSTOMER SATISFACTION

How happy people are with their annuities after purchasing them has less to do with their advisers or insurance agents and more to do with the companies that provide the products, according to a separate report issued Tuesday by J.D. Power.

“[C]ustomer engagement with provider websites and direct communications from their provider have increased considerably and have helped drive an increase in overall annuity customer satisfaction — even as satisfaction with the adviser experience declines,” that report stated. The firm surveyed more than 2,500 individual annuity contract owners between June and July.

The provider with the highest overall satisfaction, according to the survey, was TIAA, although that company was excluded from the official results, as it did not meet J.D. Power’s criteria for inclusion. Beyond that, the companies with the highest reported customer satisfaction were New York Life, Nationwide, Fidelity & Guaranty Life and Equitable. Providers with ratings below the industry average, from highest to lowest score, were Lincoln Financial, Jackson National, Athene, Prudential, AIG, Allianz and Brighthouse Financial, according to J.D. Power.