US annuities set rapid pace in first quarter

The pace of sales in the US annuity space isn’t going to slow down any time soon, if a new report from Limra is any indication,

Drawing on preliminary data from the industry, Limra said US annuity sales reached $113.5 billion in the first quarter of 2024, marking a 21 percent increase from the previous year and nearing the all-time high set in the final quarter of 2023.

This surge represents the strongest first quarter for annuity sales since the 1980s when Limra began tracking this data.

"The remarkable sales trends over the past two years continued into 2024. Favorable economic conditions and rising investor interest in securing guaranteed retirement income have resulted in double-digit sales growth in every product line," Bryan Hodgens, head of Limra research, said in a statement.

Despite potential challenges on the regulatory and economic fronts, Limra anticipates that annuities will maintain strong sales performance throughout the year.

The surge was led by fixed-rate deferred annuities, which saw sales increase by 16 percent to $48 billion in the first quarter, making up over 42 percent of the total annuity sales.

"Eighty-five percent of FRD sales are short duration products (less than five years),” Hodgens said. “Higher interest rates combined with insurers’ ability to offer, on average, better crediting rates, have propelled product sales to another level.”

The first-quarter results for FRD annuities outpaced average annual FRD sales from 2008 until 2021, he added.

Fixed indexed annuities also set a record with $29.3 billion in sales, up 27 percent from last year.

"FIA products continue to offer very competitive crediting rates while protecting the principal investment, an attractive proposition for today’s investors," Hodgens said.

Income annuities followed suit, with single premium immediate annuity sales climbing 19 percent to $4 billion and deferred income annuity sales jumping 35 percent to $1.1 billion. Both segments benefited from higher interest rates.

Registered index-linked annuities extended their growth streak, recording a 40 percent increase to $14.5 billion in sales for the quarter.

"Product innovation and new market entrants suggest the RILA market still has significant growth potential," said Hodgens, with Limra fearlessly forecasting a bumper sales year of more than $50 billion for the category.

Traditional variable annuities experienced a 13 percent increase to $14.5 billion, buoyed by a strong equity market performance.

“While these products will not command the market share they did 10 years ago, Limra predicts the continued equity market growth will propel traditional VA sales to grow as much as 10% in 2024 from current levels,” Hodgens said.