Strong yields seen amid elevated interest rates
Torsten Slok, chief economist at Apollo Global Management, emphasized the pivotal role of retail and pensions seeking higher yields and noted annuity sales are driven by more Baby Boomers retiring amid elevated interest rates.
According to Deutsche Bank AG strategist Ed Reardon, funds raised through annuities typically gravitate toward investment-grade debt, predominantly fixed-rate with durations spanning three to 10 years in line with annuity tenures.
Reardon noted AAA commercial mortgage-backed securities (CMBS) are also witnessing robust demand, with excess returns surpassing those of investment-grade and high-yield corporate debt.
Despite a slight decline anticipated this year, annuity sales could still surpass $693 billion over the next two years, with 2023 marking a record high of $331 billion, according to LIMRA estimates.
Bloomberg said fixed-rate deferred annuities, a popular annuity variant, have recently experienced an exceptional surge in sales. Policyholders invest upfront, accruing interest at a fixed rate until the annuitization point, when they start receiving income payments.
Source: mpamag.com