Individual annuity sales to surpass $300B annually, says Limra

Demand for retirement income solutions, improving economic conditions, and demographic shifts will all continue to contribute to rocketing sales of individual annuities in the U.S.

That’s the outlook from Limra, which says that the record high of $313 billion reached in 2022 is set to be surpassed in 2023 with sales estimated at $350 billion, mostly fixed annuity sales driven by higher interest rates and market volatility increasing demand for investment protection products.

But the sharp rise in sales of the past two years does not appear to be an anomaly, with the forecast for 2024 calling for sales of between $311 billion and $331 billion, down from this year’s expectation, as rates peak and the 10-year Treasury rate hovers around 4%.

However, in 2025 the forecast is for sales to grow around 10% to between $342 billion and $362 billion as rates recover.

INDIVIDUAL PRODUCTS

Limra’s forecast breaks down the potential for individual products:

• Fixed-rate deferred annuities will face growing competition from bank CDs and cash equivalent solutions as short-duration rates improve. Sales of these products will be considerably (maybe 30%) lower than the record high sales set in 2023, FRD sales will likely exceed $100 billion in 2024 and 2025.
• Fixed indexed annuities will be subdued by lower interest rates, which will see demand for protection slow as crediting rates decline. However, sales of this product will remain historically strong and are forecast to reach nearly $100 billion in 2025.
• Income annuity sales will also be softened by falling interest rates but will benefit from more than 3 million Americans reaching the typical age range when single premium immediate annuities are purchased over the next two years. Sales are predicted to top $15 billion in 2024 and set a new record in 2025 — above $18 billion.
• Registered index-linked annuities will post a strong year as steady equity market growth and lower interest rates make the value proposition of RILAs particularly attractive. Sales of these products are likely to be as high as $52 billion in 2024 and $57 billion in 2025.
• Traditional variable annuity sales should benefit from a growing equity market over the next two years, but regulatory headwinds may counter the sales growth potential. Traditional VA sales are predicted to grow as much as 10% to $60 billion in 2024 and increase as much as 8% to $65 billion in 2025.