Annuity FYI Blog

LIMRA just released annuity sales results from the fourth quarter of 2010 and the total year results, according to Ruthie Ackerman’s article in the Financial Times. “Who Were the Top 20 Annuity Writers in 2010?” summarizes the top sellers.  Total annuity sales were published along with totals for sales of variable annuities and fixed annuities.  Of the top 20, half of them had sales increases over the previous year.  The top three sellers of variable annuities reached sales records, while 70% of the top variable annuity companies saw overall sales increases in 2010.

Prudential Annuities had both the most annuity sales and the highest sales for variable annuities.  They were number one with total annuity sales of $23.3 billion and variable annuity sales of $21.7 billion.  They were fourteenth in their sales of fixed annuities.  Allianz Life of North America sold the most fixed annuities, selling $7.1 billion.  They came in seventh in total annuity sales and thirteenth in variable annuity sales.

The top 20 companies accounted for 80% of total annuity sales, 93% of variable annuity sales, and 74% of fixed annuity sales.  Rounding out the top 10 companies in total annuity sales after Prudential were MetLife, Jackson National Life, TIAA-CREF, AIG Companies, Lincoln Financial Group, Allianz Life, New York Life, RiverSource Life Insurance, and ING.  Many of the top 10 annuity sellers also made the top list for variable annuities and fixed annuities.  In addition to those already mentioned, AXA Equitable and Nationwide Financial were in the top 10 for variable annuities.  For fixed annuities, AVIVA, American Equity Investment Life, and Great American were also in the top 10.  LIMRA’s report shows the entire top 20 list for each investment.

The Kehrer-Jackson Monthly Bank Annuity Sales Survey showed a continuing increase in sales of variable annuities last year.  Insurance News Net’s article “Recovery in the Works for VAs in Banks?” by Kehrer-LIMRA summarized the annuity findings.  Fixed annuity sales remained stable, while sales of variable annuities increased each month in the fourth quarter.  There was a 4% increase in combined sales of fixed and variable annuities through banks, for a total of $2.7 billion.  That was around the same increase that the products had in November, but 7% above December of 2009.  Since the low sales number in January of 2010, total annuity sales have increased 24%.

Sales of variable annuities were $1.6 billion in December of 2010, a 21% year over year increase and a 6% increase from November.  This was the second straight month with an increase and brought the sales back up to the levels from springtime of last year.  The gap between sales of variable and fixed annuities is widening by the month.  Back in December of 2009, $.84 in variable annuities was sold for every dollar of fixed annuities.  After a complete turnaround, there is now $1.48 in variable annuities sold for every dollar of fixed annuities.

Fixed annuity sales in banks were relatively stable in the fourth quarter of 2010, staying around $1.1 billion.  The December sales of $1.08 billion were just a slight increase from November’s sales of $1.07 billion.  Fixed annuity rates and 5-year CD rates are being closely monitored because of the spread.  It is now at 34 basis points, with fixed annuities being above CD’s with five year time-frames.  Kehrer-LIMRA is expecting a sales increase because of this larger spread.  Whether looking at fixed or variable annuities, it is best to consult an expert for your individual situation.

Women around the age of 73 are most likely to purchase an immediate annuity, according to “Who’s Buying Immediate Annuities and How to Get Their Business” by Danielle Andrus of Advisor One. LIMRA recently issued a report detailing the typical immediate annuity consumer and the direction they believe the immediate annuity marketplace will take over the coming years.  Women buy 60% of immediate annuities and are around age 73 when they make their purchases.  Women and men may choose to convert their 401k annuity using the pre-tax money from their working life 401k savings.  Those who use pre-tax money to buy immediate annuities usually do such at the same time they start receiving Social Security benefits and IRS required minimum distributions from other investments.

Typically, immediate annuity purchasers choose to receive lifetime payments that are guaranteed, but do not opt for increases based on inflation or other factors.  The average purchase of an immediate annuity is $107,000.  Many buyers opt for some type of liquidity option that will allow them to receive a cash value for their annuity if they wish or a combination cash withdrawal and continued payouts.  LIMRA thinks that this annuity market will increase from $7.5 billion last year to $7.7 billion this year and up to $11 billion in 2013.  Advisors should take note that most immediate annuity contracts have guaranteed income benefits and payouts and the best age to cater to investors would be before age 62 when they start purchasing these investments in larger numbers.

The guaranteed living benefit rider for variable annuities has become increasingly popular, according to National Underwriter’s “VAs with GLB Rider Rose 18% in 2Q.”  Variable annuity products with the GLB accounted for $20.3 billion of new deferred sales during the second quarter of this year.  This was an 18% increase over first quarter sales.  It was the third quarter in a row that 87% of investors opted for the guaranteed living benefit rider when purchasing their variable annuity products.  LIMRA of Windsor, Connecticut performed the study of 27 different carriers representing 95% of the industry sales in the second quarter.

Other guaranteed benefits were elected about the same percentage of time as in the past.  The guaranteed lifetime withdrawal benefit was elected 64% of the time.  Guaranteed minimum income benefits were chosen in 17% of cases.  Both the guaranteed minimum accumulation benefit and guaranteed minimum withdrawal were chosen 3% of the time.  The variable annuity assets with the GLB rider actually went down 3% to $427 billion in the second quarter as did the total variable annuity assets which went down 5% to $1.36 trillion.  GLBs were available in deferred variable annuity contracts that generated $23.2 billion in premiums.  The guaranteed living benefit rider is really seeing a rise in popularity because of its lifetime benefits.

Prudential Financial Inc. and American International Group Inc. contributed to the United States’ largest variable annuity sales increase since 2007.  According to Bloomberg’s “Variable-Annuity Sales Rise 11% as Prudential, AIG Post Gains” by Inyoung Hwang, the $35.5 billion in sales was an increase of 11% for the second quarter of this year.  Prudential sold $5.3 billion of variable annuities to capture the top spot in sales.  This was a huge increase from their $3.38 billion in sales during the second quarter of last year.  Limra International believes that the market is showing signs of recovery since most of the top 20 companies had growth in their variable annuity sales.

After AIG was helped by the federal government, they increased their variable annuity sales 45% from $1.09 billion to $1.58 billion.  AIG was able to increase their operating profit by 17% after the profit from their U.S life insurance businesses quadrupled from last year’s profits.  The second highest sales of $4.5 billion belongs to MetLife Inc., although they experienced a very small decline from the same period last year.  Annuity rates and other factors contributing to the variable annuity sales affected the top companies differently.  The third and fourth place sellers were TIAA-CREF and Jackson National Life.  The industry is hopeful that this second quarter increase will continue into the future.