Annuities continue to draw significant investor interest, with first-quarter sales exceeding $106 billion, according to the trade group Limra.
This marks the sixth consecutive quarter where annuity sales have surpassed $100 billion, a testament to the rising demand for principal protection and guaranteed income products.
“Investors are increasingly looking for stability and income guarantees, especially in volatile markets,” says Bryan Hodgens, Limra’s head of research. Yet, he acknowledges a critical gap: “Too many consumers and advisors still lack a clear understanding of annuities and how these products can contribute to retirement security.”
Fixed-Rate Deferred Annuities Lead the Way
Fixed-rate deferred (FRD) annuities remain the primary growth driver within the annuity market. Although sales of FRD annuities declined by 8% compared to the record-breaking first quarter of 2024, they reached $39.7 billion—an impressive 36% jump from the fourth quarter of 2024. These annuities, which earn interest at an insurer-defined rate for a predetermined period, provide investors with both stability and predictable payouts, either over a fixed term or for life.
Market volatility in March spurred a late-quarter surge in FRD sales. “When uncertainty grows, investors prioritize protection and assured growth,” explains Keith Golembiewski, Limra’s annuity research director.
RILAs Show Remarkable Growth
Registered index-linked annuities (RILAs) continued their upward trajectory, achieving $17.4 billion in first-quarter sales, a 20% year-over-year increase. Limra’s data indicates that 75% of the top 20 RILA carriers reported sales growth during the quarter.
RILAs appeal to investors seeking a balance between growth potential and downside protection. Unlike fixed-index annuities (FIAs), RILAs typically allow for greater upside potential while incorporating some level of risk. “RILAs provide a compelling value proposition for investors juggling market uncertainty and the need for growth,” says Golembiewski.
Fixed-Index and Variable Annuities Maintain Strong Demand
Fixed-index annuities (FIAs) posted $27.8 billion in sales during the first quarter, a 3% year-over-year decline. However, combined with RILAs, these products now represent 42% of all annuity sales—a substantial increase from less than 30% a decade ago. Both FIAs and RILAs offer tax-deferred growth opportunities tied to stock index performance, though FIAs are structured to ensure investors do not lose principal in a down market.
Traditional variable annuities also saw growth, with sales climbing 12% year over year to $15.3 billion. This marks the fifth consecutive quarter of year-over-year sales increases in this category, signaling sustained investor interest in customizable, growth-oriented annuity options.
A Changing Landscape for Annuity Providers
The robust sales numbers come as the annuity industry faces evolving challenges and opportunities. A Goldman Sachs survey highlights growing provider concerns about potential economic slowdowns or recessions. Providers are increasingly exploring the integration of artificial intelligence, diversifying into foreign markets, and emphasizing lifetime income solutions. Many are also adding annuity options to workplace retirement plans, reflecting a broader shift toward holistic retirement planning.
Despite these advancements, Hodgens underscores the need for greater education within the industry. “Advisors and their clients need better tools and insights to understand the unique benefits annuities can bring to retirement planning,” he asserts.
The Path Forward
As annuity products continue to gain traction among investors, their evolving structures and expanded accessibility offer significant opportunities for advisors to provide tailored, secure income solutions. By improving education and transparency, annuity providers can bridge the gap between growing demand and product comprehension, ensuring more investors fully realize the benefits of these financial tools.
