Strong Stock Market Pushes Up Annuity Assets
Overall growth was slower than for the total retirement asset pie, according to new ICI figures.
Stock market gains and retirement savers’ good feelings about stock funds pushed up U.S. asset totals in the second quarter.
The overall total increased by 4.1% between the second quarter of 2023 and the latest quarter, to $2.4 trillion, according to the Investment Company Institute.
Fixed annuity assets fell 4.3%, to $551 billion.
Variable annuity assets increased by 6.8%, year over year, to $1.9 trillion.
The amount of variable annuity assets held inside individual retirement arrangements and employer-sponsored defined contribution plans increased by 8.6%, to $541 billion, and the amount held outside retirement accounts grew 6.2%, to $1.35 trillion.
The amount of assets held in variable annuity stock funds outside of retirement accounts climbed $67 billion, and that accounted for about half of the growth in the overall variable annuity asset total.
What it means: Clients are seeing nice increases in variable annuity value.
Insurers that promised to buffer some or all of the increases in value against losses are having to find ways to hedge more variable annuity asset value.
The numbers: The ICI asset totals for annuities reflect only assets, not flows of assets into or out of annuities.
The asset totals could be affected by many forces, including new annuity contract sales; moves by employers or individual annuity owners to add deposits to their annuities; investment losses and gains; regular, planned withdrawals of retirement income; and early, unplanned withdrawals by annuity owners who needed the cash.
Variable asset allocations: ICI provides an asset allocation breakdown for the variable annuity assets held outside retirement plans.
The value of the assets held in the bond funds fell 2.9%, to $238 billion.
Increases in the value of the assets held in money market funds, world stock funds and hybrid funds ranged from 2% to 3.3%.
Domestic stock fund assets increased by 11%, to $769 billion. The share of the assets held in the stock funds increased to 57%, from 54%.
Although ICI does not say how much of the stock fund gains came from investment growth and how much from new contributions and allocations from other types of funds, the big increase likely means the stock funds benefited both from strong returns and assets attracted by the strong returns.
The context: Overall retirement assets increased by 10.4%, to $40 trillion, and overall household financial assets increased by 7.1%, to $123 trillion.
The new ICI figures mean that annuities held about 6.1% of Americans’ retirement assets.
That share was down from 6.5% a year earlier and down from 8.5% 10 years earlier.
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