Are you a numbers person? I am not one by nature; I tend more toward the verbal, the literary. But being involved in the annuity business for as long as I have, I have become relatively comfortable dealing with a host of metrics and data points.
Which brings me to another thing not so easy to admit, which is that I had not looked through the data section of the IRI’s annual Fact Book for quite some time. I am familiar with earlier editions of the book and was not aware that, in recent years, more substantial information is contained in it.
One thing that struck me was that data from Morningstar in the 2025 edition confirmed my suspicion that the variable annuity business has been in negative flows, mirroring flow trends I’ve seen in stock-traded insurers. A table on Page 175 shows that VA flows have been in negative territory since 2014 and moving further into the red each year through 2024. And on Page 155 we can see the effect of these flows, that the VA portion of total industry assets has fallen from 68% in 2020 to 53% in 2024.
So here I will raise the natural question: where are those outflows moving? Certainly, we can point to a combination of factors: one-time and systematic withdrawals; GLWB payouts; surrenders; 1035 exchanges; qualified plan and IRA transfers; annuitizations; death benefit payments.
Which of those is making the biggest difference? Could it be that some VA-to-fixed annuity switching has been going on? I raise this question because while VA outflows went from -$5.4 billion in 2014 to -$162 billion in 2024, fixed annuity sales over the same period skyrocketed, from $91.5 billion to $301.8 billion. It’s just my hunch that some VA money could have contributed to that huge jump.
Another trend I saw was an increase in non-qualified annuity assets as a percentage of the total (see Page 158). In 2021, NQ assets were 30% of industry AUM of $3.16 trillion, which was a high watermark. By 2024, that portion rose to 40% although assets had declined at that point. Just glancing quickly, I see that NQ sales in the past three have grown on both the VA and fixed sides, but it appears more so on the latter.
What else did I find in skimming through the exhibits? Things we already knew: that on the variable side, RILAs are the standouts, growing from 31% of total VA sales in 2021 to 54% in 2024; that MVA products (think MYGAs) have sustained popularity, going from 20% of fixed annuity sales to 29% over that span; and immediate annuity sales steadily rising.
Returning to the net outflow situation, I think it bears monitoring. For now, VA assets of leading carriers seem to be holding up well – sustaining profitability via fee income – as gross sales are offsetting money going out the door. But that might not be the case forever. Any of the factors I listed before could cause AUM to drop in a hurry and a market decline would only worsen matters; and if enough GLWB owners have activated their riders, then those outflows will be locked in for many years to come.
How about the fixed annuity sales boom? Some fresh money has been fueling that but so have exchanges and transfers from vintage VA contracts and fixed annuities out of their surrender periods. How long will the latter continue? That remains to be seen.
To wrap up, there’s one thing for certain: I will have to make the IRI Fact Book a “must read” in future years, because the data pages are revealing a lot.
