By Allison Bell
Higher interest rates and client concerns about stock market volatility pushed sales of multi-year guaranteed annuities (or MYGA contracts) up hard in the second quarter.
U.S. MYGA contract sales increased 82% between the second quarter of 2021 and the latest quarter, to $26 billion, according to new annuity issuer sales survey data from Wink.
Sheryl Moore, the CEO of Wink, said second-quarter MYGA sales “exploded.”
“Given the recent rate environment, I project that we can count on next quarter’s MYGA sales being significant as well,” she said.
Sales of all of the types of individual, deferred, U.S. annuities Wink tracks increased 13% year-over-year, to $73 billion. Non-variable annuity sales increased 47%, to $46 billion.
Variable annuity sales fell 31%, to $26 billion, but sales of index-linked variable annuities — also known as structured annuities or registered index-linked annuity (RILA) contracts — increased.
What It Means
Clients want protection against the full force of a bear market, but they’re still hungry for asset growth.
Wink based the second-quarter annuity sales figures on data from 17 index-linked variable annuity issuers, 43 variable annuity issuers, 42 traditional fixed annuity issuers and 69 multi-year guaranteed-annuities (MYGA) issuers.
Here’s a look at what happened to sales of the types of annuities Wink tracks between the second quarter of 2021 and the latest quarter:
- Multi-year guaranteed annuity contracts: $26 billion (up 82%)
- Non-variable indexed annuities: $20 billion (up 17%)
- Registered index-linked annuities: $11 billion (up 6.7%)
- Traditional fixed annuities: $479 million (up 3.7%)
- Traditional variable annuities: $16 billion (down 31%)
Broker-dealers accounted for 38% of the annuity sales included in the data; career and independent agents, 36%; and banks, 25%.
In spite of life insurers’ efforts to reach out to registered investment advisors, clients classified as coming in through RIAs accounted for just 0.9% of annuity sales volume. It’s possible that many RIA-advised clients who used annuities bought the contracts through other types of distributors.
Life insurers offer one year of interest rate guarantees through traditional fixed annuities, and more than one year of rate guarantees through MYGA contracts.
Issuers of traditional variable annuities may offer no built-in contract value protection at all, but they may offer full or partial protection through riders.
Issuers also offer two types of index-linked contracts, or annuities with crediting rates tied at least in part to the performance of investment indexes or ETFs: non-variable indexed annuities, which offer full protection of contract value against investment market-related losses, and RILA contracts, which may offer no built-in protection, or only partial built-in protection, against market losses.
Index-linked products have been growing partly because they are popular with life insurers.
Insurers can use easy-to-buy derivatives to power the investment options and limit risk, and that tends to make them cheaper and easier for insurers to manage than traditional variable and fixed annuities.
Read More: https://www.thinkadvisor.com/2022/08/31/higher-rates-fuel-q2-multi-year-guaranteed-annuity-sales-wink/