"I can only guess that the annuity company is wrongly characterizing the payments as withdrawals"
This would explain the reporting. If these payment are being received under a stretch provision where each payment is part of a series of periodic payments based on your life expectancy, yes, I would expect each payment to be treated as including a portion of the basis and this Form 1099-R would be showing an erroneous taxable amount. Many annuity companies offer this beneficiary payout option and indicate that the exclusion ratio is one of the benefits of choosing this payout method.
Given that the Form 1099-R shows a taxable amount in box 2a and does not have box 2b Taxable amount not determined marked, using the General Rule to calculate a taxable amount different from what is reported on the Form 1099-R will likely cause the IRS to treat this as underreporting of taxable income which will require explanation. The alternative would be to file a substitute Form 1099-R (Form 4852) where you could provide explanation for reporting the lower taxable amount calculated using the General Rule.
