Annuity sales smash record set in 2022

investmentnews.com:

The annuities business is on a tear, seeing higher sales than it has ever experienced for the second year in a row in 2023.

The numbers aren’t even close. Last year, individual annuities in the US raked in an estimated $385 billion, which was 23 percent higher than the prior record of $312.8 billion set in 2022, according to data published Wednesday morning by Limra.

The new record is due largely to a massive bump in sales for the biggest product category, fixed-deferred annuities, which at $164.9 billion shot up by 46 percent last year.

The considerable rise in sales coincides with what one industry group has dubbed “Peak 65,” with an estimated 4.1 million people in the US turning that age every year through 2027. Many of those people are entering retirement and using some of the savings they have built up in 401(k)s and IRAs to purchase annuities.

That, combined with an interesting set of economic circumstances last year, helped push sales higher than ever. High interest rates buoyed fixed annuity sales in general, and then signaling by the Fed late last year that it would likely lower interest rates in 2024 led people to buy fixed deferred annuities in December and lock in what they thought would be the best rates, said Bryan Hodgens, head of Limra research.

“Interest rates have been the story here,” Hodgens said.

That, he said, combined with the fact that a lot of annuity contracts from years ago have recently come out of their surrender periods, which means owners have been able to switch to newer, potentially more beneficial products.

“There was a lot of cash on the sidelines and lot of money coming in to put into these fixed-rate deferred products,” Hodgens said.

Strong market performance late in the year also