LIMRA’s Secure Retirement Institute recently released sales figures for the second quarter of this year. Fixed annuities are on fire based on the sales numbers for the second quarter and entire first half of the year. In Linda Koco’s Insurance News Net article, “Why Fixed Annuities Are Smokin’ Hot,” she discusses the reasons that fixed annuities are selling well. Fixed annuity sales increased 34% from the second quarter of 2013 to the second quarter of 2014, to a total of $25.2 billion. The total sales for the first half of this year increased 39% from last year, to $49.1 billion. Variable annuity sales saw a slight decline for the quarter and the half year. Both types of annuities followed along the same path as the first quarter of this year when fixed annuity sales were up 43% from the first quarter of last year.
Changing demographics in retirement seem to be making the biggest difference in annuity sales figures, which hasn’t been the case in the past. Fixed and variable annuity sales used to follow interest rate increases and stock market increases, respectively. But despite flat interest rates, fixed annuity sales are soaring. The oldest members of the Baby Boomer generation are either retiring or nearing retirement age and they seem to be dictating what happens with annuity sales. These retirees are looking for fixed guarantees, rather than worrying about big stock market gains that don’t come with guarantees. Allianz Life found that 87% of people surveyed aged 55-65 would prefer a 4% guaranteed return over an 8% return that could potentially lose value if the stock markets decline. This desired guarantee favors fixed annuity products.
Fixed indexed annuities had the largest growth out of all fixed annuity products. Their $13 billion of sales in the second quarter were record breaking and showed an increase of 40% from the second quarter last year. Indexed annuities made up 52% of the total fixed annuity sales for the quarter. It’s the first time in history that quarterly fixed indexed annuity sales accounted for more than half of total fixed annuity sales. Fixed indexed annuity sales increased 41% for the first half of this year. Back in 2008, fixed deferred annuities were the most popular type of fixed annuity. The tables have turned with these two products basically switching sales figures and popularity. Indexed annuities provide guaranteed growth along with the potential for market upside gains. These benefits are attractive to Baby Boomers as shown by the average indexed annuity purchasing age of 64.
The importance of retirement income guarantees was shown in the sales figures of other types of annuities as well. Deferred income annuity sales increased 33% for the quarter and 41% for the half year. Sales of single premium immediate annuities increased 37% for the quarter and 42% for the first half of this year. Guaranteed living benefits have remained popular as well. When they are available with annuity products, around 3/4 of people opt for living benefits with fixed indexed annuities and variable annuities. The top seller of annuity products was Jackson National. Jackson National also sold the most variable annuities for the quarter. For fixed annuity products, the top seller was Allianz Life and the second spot went to New York Life. In all three categories, the top seller sold nearly double that of the company who took the second spot. Look for fixed annuities to continue their increasing sales figures for the rest of 2014.