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Protection-focused annuities expand market share as COVID-19-related economic disruptions drive investors to safety

WINDSOR, Conn., March 9, 2021 — U.S. annuity sales totaled $219 billion in 2020, 9% lower than sales in 2019, according to results from the Secure Retirement Institute® (SRI®) U.S. Individual Annuity Sales Survey.

In the fourth quarter, annuity sales rebounded to pre-pandemic levels. Total annuity sales were $58.6 billion, up 2% from 2019.

“At the start of the pandemic, the 10-year treasury plummeted to 56 basis points and the equities market contracted 32%,” said Todd Giesing, senior annuity research director, SRI. “Worried investors turned to registered index-linked annuities (RILAs) and fixed-rate deferred annuities for the balance of downside protection and investment growth. As a result, protection-focused products increased market share, representing more than half of all retail annuity sales in 2020.”

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RILAs and fixed-rate deferred annuity sales drove a significant portion of the growth for protection-focused annuity sales. In 2020, RILA sales jumped 38% and fixed-rate deferred annuity sales increased 10%.

In comparison, income-focused annuity sales plunged 28%, due to persistent, ultra-low interest rates. Immediate income annuity sales and deferred income annuity sales fell more than 30% each for the year.

“The cost of guaranteed income was very expensive under the economic conditions in 2020,” said Giesing. “Investors who would have been in the market for guaranteed income products are likely turning to other annuity contracts — like short-duration fixed-rate deferred products — to wait for interest rates to normalize.”

Part of the growth in RILAs comes at the expense of the variable annuity products with guarantee lifetime income riders (another income-focused product). This has prompted some manufacturers to pull their VA GLB products and introduce RILAs. Others have had to adjust their payout factors to address the low interest rates, which have made them less attractive.

Since the significant market contraction in April, the equity markets have rebounded but continued volatility and uncertainty has dampened growth in accumulation-focused products — primarily VA products without GLB riders. While sales of these products were stable in 2020, they have dropped more than 30% since 2015.

SRI’s Fourth Quarter U.S. Individual Annuities Sales Survey represents data from 96% of the market.

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About Secure Retirement Institute® 
The Secure Retirement Institute® (SRI®) provides comprehensive, unbiased research and education about all aspects of the retirement industry to improve retirement readiness and promote retirement security. For information on the Secure Retirement Institute, visit: www.limra.com/sri.

 

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