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New LIMRA Secure Retirement Institute (LIMRA SRI) research, examining variable annuity (VA) sales by investment objective, finds VAs designed to provide ‘income later’ through guaranteed living benefit (GLB) riders have rebounded to reach $10.2 billion in the first quarter of 2018.

LIMRA SRI has identified three investment objectives categories for different VA products based on the key features in the contract:

1. Market Growth – Sales of VA products without GLBs elected or available, and GMAB elected sales.
2. Income Later – Sales of VA products with GLWB, GMIB or GMWB riders elected.
3. Employer Plan – Individual annuity sold through an employer plan.

Prior to the Department of Labor’s fiduciary rule demise, ‘income later’ VA products had declined 11 of the last 15 quarters (chart). A combination of regulatory and economic pressures and companies managing their mix of business with living benefit riders dampened sales of these products over the past six years.

Overall, total sales of VA with a GLB rider were $10.4 billion in the first quarter 2018. This is almost one-third of the sales reported in the third quarter 2011, when sales of VA with a GLB rider reached record levels of $28.3 billion. Still, first quarter 2018 results represent the second consecutive quarter in which sales of VA with GLB riders exceeded non-GLB VAs.

The study finds elections of guaranteed living benefits are more common in sales through Broker-Dealers (Independent and National), where a wider variety of guaranteed living benefit riders are positioned to provide guaranteed current income. The overall election rate for VA GLB riders was 85 percent in the B-D channels.

Guaranteed living benefits have been a key driver of sales for VAs. After the market correction in 2002, many life insurers began offering GLB riders to customers who wished to create a guaranteed future income stream, regardless of market performance. In 2007, election rates for VA GLB riders were more than 90 percent, as customers desired the ability to guarantee a future income stream while taking advantage of market growth. LIMRA SRI finds the average age of buyers for VAs with a GLB rider is 62, generally when people are close to retirement yet still trying to build up their retirement assets.

June is Annuity Awareness Month. In today’s world, many Americans face the complex challenge of how they will best prepare themselves for retirement and ensure they have the guaranteed lifetime income necessary to achieve their desired retirement lifestyle. There are many different options to ensure retirement security, but one of them is an annuity. In fact, LIMRA research finds that nearly 7 in 10 retirees who own an annuity are more confident their savings and investments will not run out if they live to age 90, compared with 57 percent of retirees who don’t own an annuity¹.

LIMRA members can read the full report on the first quarter of the variable annuity market. Members of the media who wish to learn more about the report may reach out to LIMRA Media Contacts.

Estimates are based on data from 41 participating variable annuity companies, whose sales represent 98 percent of the total individual variable annuity market.

¹ The Differences They Make: An Advisor, and Annuity or a Formal Plan in a Retiree’s Life (2018), LIMRA Secure Retirement Institute