Traditional Variable Annuities Join the Sales Party
Volume increased less than for most other types of annuities, but it rose 20%.
Demand for annuities was so strong in the second quarter that sales of traditional variable annuities climbed to $16.5 billion, up 20% from the total recorded in the second quarter of 2023, according to new issuer survey data from Wink.
Registered index-linked annuities were the annuities with the strongest second-quarter performance: Their sales increased 45%, year over year.
Sales of all types of annuities that Wink has tracked for at least a year rose 31%, to $110 billion.
The United States generated $29 billion in gross domestic product in the second quarter. Individual deferred annuity sales amounted to 0.4% of GDP.
What it means: Many retirement savers are willing to pay insurers to absorb some or all of their market risk.
Variable Annuities vs. RILAs: An annuity contract is an arrangement that a client can use to accumulate assets and convert the assets into a stream of income.
A variable annuity can tie part or all of the contract’s crediting rate to the performance of funds that resemble mutual funds.
A RILA contract can tie part or all of the crediting rate to the performance of investment indexes. Issuers can usually reduce their exposure to investment risk by buying options or other hedging instruments designed to moderate the ups and downs of the indexes used in the RILA index menus.
Because RILAs tend to be relatively easy to administer and hedge, many insurers now prefer writing them to writing traditional variable annuities.
Issuers and regulators have typically classified RILAs as variable annuities and distinguished between RILAs and traditional variable annuities.
That could change. The U.S. Securities and Exchange Commission appeared to distinguish between RILAs and variable annuities in a recent batch of RILA registration regulations.
Sales details: Here are the Wink survey results by product type, reflecting changes between the latest quarter and the second quarter of 2023:
- RILAs: $16 billion (Up 45%)
- Multi-year guaranteed annuities: $41 billion (Up 35%)
- Non-variable indexed annuities: $32 billion (Up 28%)
- Traditional variable annuities: $15 billion (Up 20%)
- Traditional fixed annuities: $507 million (Up 0.7%)
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