When Sabrina Elliott inherited some money, her son-in-law helped her invest $40,000 in a product that dangled the prospect of stock-market gains with no risk of loss.
In exchange for locking up her money for 12 years, it promised returns tied to the market's performance. One catch: The company behind the product, Aviva, could periodically lower the portion of market gains Elliott received.
That happened twice after Aviva was purchased by Athene, an insurer backed by private-asset giant Apollo Global Management. By the time the policy ended in late 2023, her annualized return had come to 3.7%.
"That's one of the downfalls of the indexed annuities," said Carlos Dias, Elliott's son-in-law and a financial adviser outside Orlando, Fla. "Insurance companies can change the amount that's received from the particular index every year, every two years."
Wall Street behemoths like Apollo and Brookfield are just now starting to find ways to tap in to the vast sums of money in 401(k) accounts, pitching their alternative investments as another way for people to grow their nest eggs. But private-asset managers have already been vacuuming up the savings of American households through indexed annuities, which have surged in popularity over the past decade and helped power the rise of their private lending to risky companies.
The annuity industry recently got a black mark after Delaware Life, an insurer controlled by Dodgers owner Mark Walter, disclosed it was under federal investigation for failing to report loans to other entities he owned.
Indexed annuities are meant to appeal to older people who may be on fixed incomes and have little appetite for risk, but still want some exposure to stock-market gains. People turn over $50,000 or $100,000 worth of savings for a decade or so. Insurers guarantee that their investment return will never fall below zero, with the potential for better returns than a CD or savings account.
Exactly how much a person's money grows is based on terms the insurer can change during the life of policy, such as the share of the deposit that can earn market returns, any cap on those returns and any spread subtracted from those returns.
A changing formula for returns
In the first year of Elliott's policy, 60% of her money earned returns tied to the S&P 500, minus a 2.9 percentage-point spread. In the policy's seventh year, Athene lowered that share to 55%, then to 45% in the 11th year. The rest of the money grew at a fixed rate of 1%.
Elliott, a 69-year-old professor of nutrition in the Florida university system, had paid for add-ons that let her choose to parcel out payments over her lifetime or to her heirs -- options she never exercised. That reduced her annual return by about 2 percentage points.
The 3.7% annualized rate she earned over the 12-year life of her annuity handily beat the 1.9% she would have gotten from Treasurys. But it paled next to the annualized return of 13% on the S&P 500, the index to which her annuity was linked.
Athene, which Apollo fully took over in 2022, said in a statement that the annuity "performed exceptionally well, earning returns well in excess of similar safe yield alternatives, guaranteeing 100% principal protection, and providing optional enhanced death benefits and guaranteed lifetime income."
The company said "it is highly misleading to measure the performance of fixed indexed annuities using a scenario that pairs historically low rates with a strong bull equity market."
Products tied to the stock market are typically overseen by the Securities and Exchange Commission and selling them often requires a securities license. But indexed annuities can also be sold by state insurance agents, who aren't subject to the same rules on disclosing conflicts of interest or acting in a client's best interest. Indexed annuities are often among the most lucrative products these agents can sell.
American Equity, for instance, pays agents a commission of 5% to 7% of a policyholder's deposit on some 10-year indexed annuities. That is compared with around 3% for simpler annuities with fixed rates sold by the Brookfield-owned insurer.
Insurers say the higher commissions reflect the complexity of the products, which require greater explanation. The American Council of Life Insurers said state rules for insurance agents are modeled on federal requirements for securities brokers. State rules also require insurers to take measures to ensure agents sell products that meet policyholder needs.
Still, consumer advocates say indexed annuities can be a magnet for misleading sales pitches.
Educational materials for an indexed annuity sold by Delaware Life, for instance, show a premium of $100,000 growing to $2.7 million over the next 21 years.
But the "Momentum Growth" annuity is tied to a stock-and-crypto index established just last year. The returns advertised draw on hypothetical data based on the past 15 years -- a period that included 11 years with double-digit stock-market gains.
Stan Haithcock, an insurance agent in Las Vegas who sells annuities as "Stan The Annuity Man," said he gets hundreds of calls a month from people who bought indexed annuities thinking they would get higher stock-market gains.
Sometimes they learn about the annuities after receiving postcards in the mail inviting them to free lunches or dinners where they are pitched the products, he said.
"They're targeting Middle America," Haithcock said. "They're targeting people who can't afford to make a mistake with their retirement."
A perfect fit for Wall Street
After the financial crisis, private-asset managers began buying up insurers to access their huge pools of policyholder premiums.
Indexed annuities were particularly attractive. Payouts follow a relatively predictable timetable, and the policies typically last about a decade, compared with about three to five years for fixed-rate annuities. That gives asset managers flexibility to put the money into riskier, less-liquid private-credit investments like collateralized loan obligations or asset-backed securities.
If their investments do poorly, the insurer can cushion against loss by lowering the caps on policyholder gains, and if their investments do well they can fatten their profits the same way, said Larry Rybka, chief executive of Valmark Financial Group, which sells life insurance, annuities and investment products.
"That's why private equity likes this, because they can change the deal on the consumer," Rybka said.
Indexed annuities now account for nearly $200 billion in reserves at private asset manager-owned insurers, according to insurance ratings firm AM Best, more than any other type of life or annuity policy.
For policyholders, indexed annuities became less attractive as the Federal Reserve began hiking rates in 2022, making it easier to earn higher returns on fixed annuities, CDs and high-yield savings accounts. Yet sales of indexed annuities have climbed to $128 billion in 2025, up from $96 billion in 2023.
Sabrina Elliott, the Florida professor, wasn't among the new customers.
When her indexed annuity matured in 2023, Athene offered her a two-year extension. But the share of her money that would grow alongside the stock market would fall again, from 45% to 35%.
Her son-in-law helped her move the money to a traditional fixed annuity that guarantees a 5.85% annual rate.
"I'm grateful to have a financial consultant in the family," said Elliott, who plans to retire next year.