Annuity sales hit a record last year as investors looked to protect their portfolios with a stable income amid rising interest rates and accelerating inflation.
Annuities serve as insurance by providing a fixed stream of payments, guaranteeing a payout for the duration of the time one holds them. Thanks to record sales of fixed annuities, overall total annuity sales surged to $310.6 billion, a 22% increase from 2021, according to data from LIMRA Annuity Research.
That broke records set in 2008 during the Great Recession, when investors seeking the security provided by annuities bought $265 billion of them. The S&P 500 suffered a 46% loss from October 2007 to March 2009, and annuities purchases ballooned in response.
Markets in 2022 followed similar trends. The S&P 500 fell about 19.5% as the Federal Reserve hiked interest rates seven times to control inflation, sending investors searching for more secure returns.
Total annuity sales rose 39% in the last three months of 2022 from a year earlier to $87.2 billion. It was the third consecutive quarter that annuity sales set a record.
“Fluctuating interest rates in the fourth quarter prompted investors to lock in crediting and payout rates while they were high,” Todd Giesing, the assistant vice president at LIMRA, said in a news release. “Our forecast suggests that protection products will continue to boost growth in the annuity market for the next several years.”
Among fixed-rate deferred annuity sales, numbers skyrocketed in 2022. Fixed-rate annuities allow investors to have a guaranteed rate of return over a set period, making them secure investments.
In the fourth quarter, sales rose 241% year-on-year, totaling $37.5 billion. It was the best sales quarter for fixed-rate annuities ever documented, according to LIMRA. Throughout the year, sales for fixed-rate deferred annuities set a new record, totaling $112.1 billion, a 38% increase from the previous annual high of $80.8 billion that was set in 2002.
Fixed indexed annuity sales also set a record in the fourth quarter and year. In the fourth quarter, sales increased 32% year-on-year, topping out at $21.9 billion. Over the year, sales for fixed indexed annuities set a record at $79.4 billion, up 25% from 2021 and 8% higher than the previous record set in 2019.
Registered index-linked annuity sales fell 4% from fourth quarter totals in 2021, amounting to $9.9 billion. Despite a slow fourth quarter, registered index sales rose overall, reaching a new all-time high of $40.9 billion in 2022.