Annuity sales reach near-record in second quarter

Annuity sales are on a big upswing this year, with figures from April through June reaching the second-highest level ever, according to a report today from Limra’s Secure Retirement Institute.

Only the fourth quarter of 2008 saw higher sales, the organization stated. After that time, interest rates tanked, and the richness of optional benefits on variable annuities started to decline across the industry.

Although annuity sales had trended upward for several years, the pandemic tamped down demand. That has changed this year, with second-quarter sales hitting $68.2 billion across all products, up by 40% from the second quarter of 2020, the Secure Retirement Institute wrote. For the first half of the year, sales were $129.2 billion, up by 23% over that time during 2020.

Sales rose due to “strong economic conditions and consumer pent-up demand after more than a year of living with the uncertainty of the pandemic,” Todd Giesing, assistant vice president of annuity research at the group, said in a statement.

That trend might not continue for the rest of the year, however.

“Early indicators suggest third-quarter sales will be more in line with first-quarter 2021 results, given the resurgence of the pandemic over the summer and falling interest rates,” Giesing said.

Variable-annuity sales during the second quarter were 55% larger than during the second quarter of 2020, with traditional products raking in $22.7 billion and registered index-linked annuities seeing more than $10 billion in sales, according to the Secure Retirement Institute. Sales of the latter product type have been growing rapidly, with figures up by 121% from the same quarter a year ago. Registered index-linked annuities, also known as buffered annuities, are a type of VA that provides some protection against losses but has limits on growth.

“While growth in the independent and national broker-dealer channels doubled this quarter, RILA sales also grew substantially in the career channel -- up 183% -- as more companies with career forces entered the market,” Giesing said in the announcement. Those products are on track to see $35 billion to $40 billion by the end of the year, he noted.

Fixed annuities saw $35.5 billion in sales during the quarter, up from $27.8 billion a year prior, according to the report. Behind that were $16.5 billion in sales of fixed-indexed annuities and $16 billion for fixed-rate deferred products.

The former category, fixed-indexed annuities, has attracted a lot of attention from private-equity firms that lately have been pouring money into the insurance business. Amid the long-running low-interest-rate environment, some insurers have sought to partner with private-equity firms, which have more sophisticated investment strategies that could be used in general accounts.

The top seller of fixed-indexed annuities year to date through the second quarter, at about $3.3 billion, was Athene Annuity & Life, which is merging this year with backer Apollo Global Management.

Another leading seller, Global Atlantic, at $1.7 billion for the first half of the year, is majority-owned by KKR.

In variable annuities, Jackson National was by far the biggest seller during the first half of the year, at more than $9.4 billion, ahead of TIAA, at about $4.1 billion, according to the Secure Retirement Institute. Earlier this month, Jackson completed a separation from U.K.-based Prudential plc, and shares of the company are now traded on the New York Stock Exchange.

Recently, Jackson launched a fee-based annuity targeted at RIAs, in response to more potential demand in that area.

In total annuity sales, AIG was the leader during the first six months of the year, at $9.7 billion, ahead of Jackson’s $9.6 billion, according to the report.

“Our broad position across products and channels, as well as our ability to respond to changing market conditions, continued to serve us well in the second quarter,” AIG CEO of individual retirement and life insurance Todd Solash said in a statement provided by the company.