Forgive me for stating the obvious (and repeating what I’ve written in my commentaries) but it’s clear that the annuity industry is looking at a fresh sales record in 2024. This is a great thing on the face of it, but I think some questions should be asked.

Where are most of the deposits coming from? Historically we’ve been used to assets moving from insurer to insurer once surrender charge periods are over. In fact, on a Q2 earnings call an insurance executive said it could be a good thing for a client to move on even before the CDSC period is over; I have seen some agents and advisors echo that sentiment in online articles and social media posts. I am not so keen on that idea; I’ll leave it at that for now.

If clients are relinquishing their annuities after only a few years (assumedly because their caps or participation rates are low and they are not getting the returns they hoped for) then two things come to mind for me: 1) such activity could be accelerating the rate of 1035 exchanges and transfers industry-wide and 2) could be encouraging hot money to move around easier. The thing is clients with the latter kind of money are opportunistic and could move again before long.

However the rise in industry sales is such that new money is probably coming in, some speculate it’s from “sideline assets” (that had been in, say, low-yielding CDs). If that’s the case then such funds, I would argue, are primarily being parked for protection and accumulation rather than lifetime income. Those assets may also go elsewhere over time.

All this brings me to the question what clients will do when interest rates – and by extension annuity crediting rates – really start to fall? We are expecting the Federal Reserve to cut, aren’t we? One might think the Fed’s action would help the stock market and that would be good for traditional VAs and RILAs, but that’s no sure thing.

If annuity insurers are really attracting new customers, I hope they are getting the kinds of folks who will stick around for a while.