Annuity sales are experiencing significant growth, particularly in indexed and multi-year guaranteed annuities. The first quarter of 2023 saw a record high in annuity sales, with deferred annuity sales reaching $84.7 billion, a 6.8% increase from the previous quarter and an impressive 41.9% increase compared to the same period the previous year. Leading carriers in this market include Athene USA, Corebridge Financial, Massachusetts Mutual Life Companies, New York Life, and Allianz Life.
However, variable annuities had stagnant sales in the first quarter and a decline of over 34% from the previous year. This decline is attributed to market conditions and economic uncertainties. Annuities are becoming more popular as investors seek safer options amidst stock market volatility, recession fears, inflation, and rising interest rates.
The most successful category within annuity sales was multi-year guaranteed annuities (MYGAs), which reached nearly $40 billion in sales during the first quarter. MYGAs offer a fixed rate guaranteed for multiple years and have experienced a substantial 173% increase compared to the previous year. Indexed annuities also saw growth, with sales of $22.6 billion, up 4.4% from the previous quarter and 35.5% from the same period the prior year.
Annuities, offered by insurance companies, provide a hedge against market fluctuations and the risk of depleting retirement savings. Despite their popularity, financial experts advise that annuities may not be suitable for everyone. Factors such as age at the time of purchase, lack of flexibility, and fixed rates should be considered. Annuity income is also subject to taxation at varying rates.
The surge in annuity sales is attributed to factors like low CD rates, making annuities with higher rates more appealing. Rising interest rates have also made annuities attractive to retirees seeking steady and secure income sources. The growth in annuity sales is driven by both market conditions and the increasing number of baby boomers reaching retirement age.