US annuity considerations reach another record high in 2022

Boosted by massive pension risk transfer transactions and strong sales of fixed annuities, total direct annuity considerations hit a fifth-consecutive record high in 2022.

Large deals and volatility

Annuity considerations rose considerably amid a year in which US companies transferred a record amount of pension obligations to insurers and carriers shifted their sales focus toward fixed annuities from variable. Total annuity considerations in the US life sector rose to $455.98 billion in 2022, a year-over-year increase of 14.8%, according to an S&P Global Market Intelligence analysis.

The growth was driven by a surge in ordinary or individual annuity considerations as the business line reached its highest total, surpassing the record set just a year earlier. Individual considerations came in at $279.35 billion in 2022, up about $42 billion from 2021.

After falling year over year in 2021, group annuity considerations experienced substantial year-over-year growth in 2022, rising 10.29% from 2021 and 7.78% from the previous record high of $163.89 billion in 2012.

Metlife, Prudential strike massive IBM deal

Among the top 15 US group annuity insurers, six companies had double-digit growth in premiums year over year, with MetLife Inc. logging the largest increase.

Stronger premiums in Metlife's US business were primarily driven by what CEO Michel Khalaf in a February earnings call described as the company's largest single pension risk transfer deal. Announced in September 2022, subsidiaries of Metlife and Prudential Financial Inc. participated in the move of $16 billion in pension obligations from technology giant International Business Machines Corp. The contracts issued as part of the arrangement covered about 100,000 plan participants or beneficiaries.

The deal between Metlife, Prudential and IBM marked the second-largest US pension risk transfer transaction on record, behind only Prudential's massive $25.1 billion deal with General Motors in 2012.

Prudential Financial remained the largest US group annuity writer in 2022 and grew its premiums 26.4% year over year.

Among the top 15 group annuity underwriters, six companies saw year-over-year premium decreases.

Athene Holding Ltd. experienced the largest decline and was also the sole insurer to report a double-digit decrease in group premiums, falling 20.3%.

Fixed annuities en vogue

Two of the 15 biggest individual annuity writers reported triple-digit year-over-year growth in considerations, with Athene's 130.2% increase being the largest.

The gain can likely be attributed in part to an increase in Athene's indexed and fixed annuity sales, the latter of which increased by about $12 billion, growing from $8.8 billion in 2021 to $20.4 billion in 2022.

Industrywide fixed-rate deferred sales rose to $113 billion in 2022, up from $53.1 billion in 2021, according to sales data compiled by LIMRA. During that same period, traditional variable sales fell from $86.6 billion to $61.8 billion.

Only two of the top 15 US insurers saw year-over-year premium declines: Jackson Financial Inc. and Nationwide Mutual Group

Individual premiums at Jackson Financial fell 22.0% year over year, declining to $14.93 billion and knocking the company from its first-place perch all the way down to fifth.

This is only the second time Jackson Financial has lost its market leadership position since 2012. The company was briefly dethroned in 2018, when American International Group Inc. reported approximately $72 million more in yearly considerations within the business line.

Although Jackson Financial's single premiums increased $1.7 billion, its first year and renewal premiums declined by a total of $5.9 billion, according to statutory data that shows direct premiums of $19.1 billion and $14.9 billion in 2021 and 2022, respectively.

Nationwide Mutual Insurance Co. posted a more modest year-over-year decline of 0.9%, settling at $11.32 billion in individual premiums.