Annuity Sales Break Record for Second Quarter

Fixed-rate deferred annuity and registered index-linked annuity sales reach an all-time high in the second quarter, according to LIMRA.

Total U.S. annuity sales increased 16% to $79.4 billion in the second quarter, according to LIMRA’s U.S. Individual Annuity Sales Survey. Fixed-rate deferred annuity and registered index-linked annuity sales reached an all-time record for the quarter, while fixed index annuity sales fell just short of a record quarter.

“All fixed products showed positive growth as consumers looked for safety from the volatile equity markets,” says Todd Giesing, assistant vice president, LIMRA annuity research. “With average yields at or above 3% for fixed-rate deferred annuities, it’s a rate environment we haven’t seen in a long time.”

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FRDA sales led the way with a total of $28.7 billion in the second quarter, which is 79% higher than the figure seen during Q2 of 2021. In the first six months of 2022, fixed-rate deferred annuities totaled $44.6 billion, according to LIMRA, marking a 46% increase compared with the same period last year.

“Overall, banks and the full-service national broker/dealers are driving this record-setting growth. Second-quarter overall annuity sales through banks grew 48%, and sales through full-service national broker/dealers were up 55% for the quarter,” Giesing observes. “Independent broker/dealers have not taken advantage of the rising rates and growth in FRDAs. Overall sales by independent broker/dealers were down 12% for the quarter.”

Registered index-linked annuity sales saw the highest quarter ever in Q2, up 8% to $10.8 billion. In the first half of 2022, RILA sales were $20.4 billion, LIMRA’s survey found, which is 6% higher than prior year. RILA sales now make up 40% of overall variable annuity sales.

According to the survey, fixed index annuity sales also had a strong quarter, with $19.7 billion, up 19% from Q2 2021 and 20% year to date.

“When you look at the carriers that fared well in the quarter and in the first half of 2022, those with a diversified suite of annuity product offerings were most successful,” Giesing says.

Traditional variable annuity sales fell in Q2, dropping 27% to $16.5 billion—the lowest quarterly results since the fourth quarter of 1995. Sales are down 20% year to date.

Single premium immediate annuity sales totaled $2 billion, up 25% from the first quarter. Year to date, SPIA sales clocked in at $3.5 billion, 13% higher than prior year. Deferred income annuity sales grew 42% in Q2, to $520 million. In the first six months of the year, DIA sales totaled $890 million, 5% lower than prior year.

The Q2 annuity industry results are based on LIMRA’s quarterly annuity sales survey, which represents 90% of the total market.

Global Insurance Firm Latest to Face ERISA Litigation

The plaintiffs claim familiar allegations pertaining to excessive recordkeeping and administrative fees.

A new Employee Retirement Income Security Act lawsuit has been filed by a proposed class of plaintiffs in the U.S. District Court for the Southern District of New York, naming as defendants the Swiss Re American Holding Corporation, the firm’s board of directors and various committees allegedly tasked with operating the company’s defined contribution retirement plan.

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As is common in ERISA lawsuits filed against large employers, the plaintiffs suggest their retirement plan’s fiduciaries failed to fully disclose the expenses and risk of the plan’s investment options to participants and beneficiaries. The lawsuit also alleges that plan fiduciaries allowed unreasonable expenses to be charged to participants and selected, retained or otherwise ratified high-cost and poorly performing investments.

“Prudent investments were readily available at the time defendants selected and retained the funds at issue and throughout the class period,” the complaint states.

According to the plaintiffs, the defendants breached their fiduciary duties of prudence and loyalty and mismanaged the plan by paying excessive recordkeeping fees to the plan’s recordkeeper, Great-West Financial, which is not named as a defendant in the lawsuit. They allege the breaches collectively cost the plan millions of dollars over the course of the relevant time period.

Swiss Re has not yet responded to a request for comment about the allegations. The filing of the latest ERISA suit comes during a busy year for retirement industry litigation, with multiple key rulings being issued by important courts and no sign of a slowdown in the overall pace of cases.

Resembling many of the prior lawsuits, the new complaint against Swiss Re includes an extensive generalized discussion of the retirement plan industry, seeking to establish that the costs of investment services and recordkeeping have fallen significantly in recent years. The plaintiffs argue the fees they paid during the proposed class period were substantially higher than industry averages, and they use this fact to allege that fiduciary imprudence or disloyalty must have occurred on the part of plan’s fiduciaries.

Similar allegations have met with very different results in previous ERISA cases, depending on the specific facts at hand and the precedents set in the specific district or circuit court hearing the case.

The full text of the complaint is available here.

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