Annuity sales reached their highest level since the financial crisis last year, spurred in part by a type of variable annuity tied to stock market indexes, according to a report from an annuity trade association.
Sales of fixed and variable annuities totaled $233.1 billion in 2021, their highest level since 2008, when sales reached an all-time high of $261.5 billion, the Insured Retirement Institute said Thursday as it released market data for 2021.
Annuity sales last year were 12.3% higher than in 2020, when they reached $207.5 billion. The IRI report was based on data provided by Beacon Annuity Solutions and Morningstar Inc.
Fixed annuity sales totaled $114.1 billion in 2021, a 2.1% increase over 2020. “Strong fixed indexed sales offset flat book value and lower sales of market value adjusted annuities,” IRI said in a statement.
Sales of variable annuities reached $119 billion, a 24.2% increase from $95.8 billion in 2020, IRI said. The variable annuity portion of the market was led by registered index-linked annuities, structured variable annuity products that use index options to capture some market gains while limiting losses.
Sales of so-called RILAs totaled $39.1 billion last year, a 63.3% increase from 24 billion in 2020. Sales of other kinds of variable annuities rose 11.2% last year to $79.9 billion.
The IRI report confirmed indications last year that the annuity sector would hit new highs.
Terry Sawchuk, chief executive of Sawchuk Wealth, wasn't surprised that sector continued its upward trajectory. He said annuities are offering more consumer-friendly contracts today than they were five or more years ago.
In the past, the contracts featured a variety of expensive riders, Sawchuk said. New products, such as RILAs, include buffer and floor features that are sought after in volatile markets.
“The value proposition has completely reversed,” Sawchuk said. “These contracts give clients the prospect of better potential risk-adjusted returns. In this world where volatility and risk are increasing every day, that kind of value proposition is attractive to a client.”
Mitigating market whims becomes more important as clients reach retirement age. “Where it’s appropriate, we try to use annuities contracts in lieu of bonds,” Sawchuk said.
The IRI and other trade associations are advocating for legislation that would allow greater use of annuities in retirement plans. Activity around retirement savings policy spiked recently when the House approved legislation known as SECURE 2.0.
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Ten years after entering the fee-based annuity market, MassMutual Ascend says nearly half its lifetime sales came in the past two years alone – but barriers remain among fee-only advisors.
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