Q&A: Leader of Nationwide Annuity talks 2024 results, 2025 expectations

Hawley: The marketplace had a phenomenal year, bringing in $432 billion in sales and setting a new record. Fixed indexed annuity (FIA) and registered index-linked annuity (RILA) sales drove industry growth as investors continued to seek out protection-based solutions. FIA products posted sales of $126 billion, up 32% from 2023, while RILAs brought in $65 billion in sales, 38% higher than the prior year. As annuity companies continued to innovate in the variable annuity (VA) space, offering more attractive features in 2024, this product line also saw growth for the first time in three years – posting sales of $60 billion and growing 18% year-over-year.

2024 was also the year more Americans turned 65 years old than at any other point in history, with roughly 12,000 people a day reaching the age most target for retirement. This is another factor we believe contributed to the surge in demand for annuities, as LIMRA research shows annuity buyers tend to be around 65. With the U.S. population ages 65 and over expected to grow by more than 7.5 million from 2023 to 2027, we anticipate annuities will remain in hot demand.

Nationwide annuity sales also aligned with industry results. Our 2024 sales of $17 billion represented another record year for Nationwide, positioning us as a top 10 player in both the variable and fixed annuity markets. Our continued focus on diversifying our portfolio and product distribution served us well in 2024, allowing us to react to changes in demand for different types of solutions, ensuring we can meet investor needs in all types of markets and deliver on our promises for the long-term.

Hawley: While we expect market conditions to remain favorable for annuities in 2025, the industry appears to be off to a slow start. Geopolitical and economic factors are likely influencing advisor and consumer decisions in the near-term, but it’s important to stay focused on long-term dynamics and how they will impact the industry. Advisors should pay attention to:

• Equity markets: We anticipate equity markets will remain strong but volatile, fueling continued growth in VAs and RILAs. Advisors should seek out offerings from insurance carriers that are prioritizing innovation and differentiation in these products. For example, by offering both floor-based and buffered RILAs, Nationwide is providing options for protection and growth regardless of market environment. We’ve also increased rates in our Lifetime Income+ (L.inc) Rider suite, available with our VAs for an additional fee, making them among the best available in the industry. In the last month, we raised the equity exposure in our L.inc+ suite and increased fund access through our Custom Choice program. We believe investors planning for retirement shouldn’t have to choose between growth potential or income, which is why we offer VAs with strong investment lineups that provide access to full menus even when an income rider is selected.
• Inflation: Inflation will remain an economic factor to watch as investors seek out solutions that will help them keep pace. VAs are a great way to keep up with inflation in a volatile market over a longer period of time. VAs with guarantees allowing investments in equities that provide a measure of downside protection can be particularly well-suited for this purpose.
• Interest rates: Inflation accelerated in January, rising 3% on an annual basis and potentially instilling further caution for Fed officials at upcoming policy meetings. Nationwide's Office of Economics believes the Fed will hold rates steady and does not expect another interest rate reduction until the end of 2025. If a cut is made, it will likely impact fixed annuities continued growth. Carriers like Nationwide who offer a strong portfolio of products – particularly in the VA and RILA spaces – will be attractive to advisors and their clients in 2025’s market environment.

Hawley: Today’s investors are seeking tailored products for their unique financial goals and lifestyles. While annuities offering flexible features, like adjustable withdrawal rates, multiple payout options and customizable riders are critical, personalized experiences will be crucial for connecting with clients in 2025 and beyond. Advisors – and annuity providers – that offer personalized communications and individualized interactions will set themselves apart in today’s crowded marketplace.

Leveraging data analytics and digital tools can also help with this. While it’s clear the benefits of digital tools don’t come without risks, embracing them is vital to stay ahead of the competition and ensure seamless transactions for clients. That’s why the Insured Retirement Institute (IRI) is moving to a digital-first strategy that proposes adopting fast, modern and streamlined processes for each step in the financial professional and consumer journey. Creating standardized rules of engagement for how the industry delivers essential data to facilitate faster transactions and easier management of annuity products is good for everyone. Advisors should consider IRI’s model when thinking about integrating digital tools into their practice to help streamline operations and enhance client engagement.

Nationwide is also investing heavily in new technology to enhance the advisor and investor experience. We’re implementing a new policy administration system that will standardize experiences for our associates and partners. We’re focusing on meeting partners’ needs with technology-enabled solutions, delivering competitive products and solutions to the market faster and optimizing business tools and processes to make simplicity a priority and enable an efficient experience.

By putting additional focus on aligning product offerings, features and servicing capabilities with annuity buyers’ preferences, we’ll continue seeing profitable growth across the industry in the years ahead.

Hawley: The changing political and legislative landscape is always an area Nationwide is watching. One of the themes we’re seeing at the federal and state level is to modernize, create efficiencies and reduce regulatory burdens. It’s still too early to say exactly what we could see in 2025 and beyond, but the quick pace of change is a new normal for our industry. Nationwide continues to advocate for policy changes that are good for both the industry and American savers.

To that end, we believe the registered investment advisor (RIA) market has evolved and would benefit from a unique RIA license, providing more choice and opportunities for consumers to get access to fee-based annuity products. Under the current model, RIAs function as an agent of an insurance company and as a fiduciary for their client – creating a conflict. A proposed unaffiliated license would provide RIAs with the ability to recommend insurance products – both annuity and life – without the need to hold a state and life health license, variable line of authority and appointment with an insurance company. We think this is positive for both RIAs and consumers. By providing consumers more access to insurance products, they can better meet their financial planning needs, regardless of which type of financial professional – commission-based or fee-based – they choose to work with.