With strong sales to begin the year, LIMRA is projecting that annuity sales in 2022 could break the record-setting sales achieved in 2008.

LIMRA cites a number of factors behind its projection that total annuity sales may increase from $254.6 billion in 2021 to about $300 billion by 2024, including:¹

• A growing market, as the product’s primary market of individuals ages 65 or older grows to more than 8.5 million by 2026
• Rising rates, which make fixed annuities more attractive to retirees
• Market volatility, which may lead many retirees to seek out the safety and predictability of income guarantees offered by annuities

While annuity sales are expected to expand, LIMRA also suggests that the composition of those sales will change from where they are today. They expect that traditional investment-focused variable annuities and those with guaranteed living benefits will flatten as insurance providers shift their focus to registered index-linked annuities (RILAs).

This shift is already underway, as RILA sales experienced an outsized 62% growth in 2021 as investors rushed to safety.²

Additionally, it appears insurance carriers are making RILAs a top priority for the next couple of years, at least. According to a survey of insurance company executives conducted by Goldman Sachs Asset Management, Index Offerings is the top investment vehicle that will see an increase in use, followed by Subadvised Funds.³

Interestingly, this same survey found that while the rise of RILAs was viewed as the most significant trend in the next year, RIA adoption of annuities was seen as the top trend over the next three years.⁴

The annuity business is also looking at undertaking a digital transformation. Among the findings of one survey:⁵

• 72% of insurance carriers are shifting business models away from the in-house model of manufacturing and distributing proprietary product to digitally distributing other firms’ product and services, choosing to focus on customer experience.
• 42% of insurers have already created partial or complete digital business platforms, while 56% are in the process of planning or building one.
• Investments in digital business platforms are centered on adding new distribution channels, incorporating new technologies (e.g., IoT, blockchain, AI), applying big data to target the best customers and maintaining customer relationships.

The signs are clear for financial advisors. The market opportunity is expanding, with RIAs finally making annuities a meaningful component of their solution set for clients.

Sources:

1. https://www.limra.com/en/newsroom/industry-trends/2022/limra-predicts-steady-growth-in-annuity-sales-as-number-of-retirees-expands/#:~:text=A%20Growing%20Market&text=When%20it%20comes%20to%20the,in%20this%20segment%20growing%2028%25.
2. https://www.limra.com/en/newsroom/industry-trends/2022/limra-predicts-steady-growth-in-annuity-sales-as-number-of-retirees-expands/#:~:text=A%20Growing%20Market&text=When%20it%20comes%20to%20the,in%20this%20segment%20growing%2028%25.
3. https://www.gsam.com/content/dam/gsam/pdfs/institutions/en/articles/2021/annuity_industry_survey_2021_gs_asset_management.pdf?sa=n&rd=n
4. https://www.gsam.com/content/dam/gsam/pdfs/institutions/en/articles/2021/annuity_industry_survey_2021_gs_asset_management.pdf?sa=n&rd=n
5. https://us.nttdata.com/en/-/media/assets/white-paper/la-insurers-shift-their-digital-transformation-into-high-gear-research-paper.pdf

Please reference disclosures: https://blog.americanportfolios.com/disclosures/