Investors poured cash into traditional fixed-rate deferred annuities in the first half of the year.
Sales of multi-year guaranteed annuities and other traditional fixed-rate deferred annuities increased to $83.7 billion in the first half, up 16% from the total for the first half of 2023, according to new issuer survey data from LIMRA.
Overall sales of U.S. individual annuities increased even more — by 20% — but the surge in fixed-rate deferred annuity sales had an especially broad impact on life insurers.
All of the companies on LIMRA's list of the top 20 fixed-rate deferred annuity issuers for the first half of this year recorded at least $1.2 billion in sales.
In the first half of 2023, just 15 companies recorded more than $1 billion in fixed-rate deferred annuity sales.
About 0.7% of U.S. gross domestic product flowed into the contracts in the first half.
What it means: Crediting rates on fixed-rate deferred annuities are still relatively high when compared with rates on bank certificates of deposit, and regulator pressure on banks' capital ratios may be affecting banks' ability to compete for "safe money" assets.
The current national average rate for a five-year CD is about 1.4%, according to the Federal Deposit Insurance Corp.
Multi-year guaranteed annuity issuers with A.M. Best ratings of A or higher are all paying rates of at least 3.6% for contracts with five-year rate guaranteed periods.
