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RETIREMENT ASSETS |
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SALES OF FIXED AND VARIABLE ANNUITIES
There are several types of annuities. Deferred annuities generally accumulate assets over a long period of time, with withdrawals usually as a single sum or as an income payment beginning at retirement. Immediate annuities allow purchasers to convert a lump sum payment into a stream of income that begins right away.
Deferred and immediate annuities can be either fixed or variable. Generally, interest credited and payments made from a fixed annuity are based on rates declared by the company, which can change only yearly. Fixed annuities are considered “general account” assets. In contrast, variable annuity account values and payments are based on the performance of a separate investment portfolio, thus their value may fluctuate daily. Variable annuities are considered “separate account” assets.
There are a variety of fixed annuities. One example, the equity-indexed annuity, is a hybrid of the features of fixed and variable annuities. It credits a minimum rate of interest, just as other fixed annuities do, but its value is also based on the performance of a specified stock index—usually computed as a fraction of that index’s total return.
Annuities can also be classified by marketing channel—sold to groups or individuals (see the Premiums by Line table, page____).
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INDIVIDUAL ANNUITY CONSIDERATIONS, 2003-2007 (1)
($ billions)
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Total |
Year |
Variable |
Fixed |
Amount |
Percent change |
| 2003 | $129.4 | $89.4 | $218.8 | -0.5% |
| 2004 | 132.9 | 87.9 | 220.8 | 0.9 |
| 2005 | 137.6 | 78.9 | 216.5 | -1.9 |
| 2006 | 184.2 | 72.8 | 257.0 | 18.7 |
| 2007 | 160.4 | 78.3 | 238.7 | -7.1 |
(1) Based on LIMRA's estimates of the total annuity sales market. Includes some considerations (i.e., premiums) that though bought in group settings involve individual buying decisions.
Source: LIMRA International. |
| - Variable annuity sales decreased 12.9 percent in 2007 after increasing 33.9 percent in 2006.
- Fixed annuity sales increased 7.6 percent in 2007 after fdecreasing 7.7 percent in 2006.
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ANNUITY DISTRIBUTION SYSTEMS
Insurance agents, including career agents, who sell the products of a single life insurance company, and independent agents, who represent several insurers, account for almost 40 percent of annuity sales. State and federal regulators require sellers of variable annuities, which are similar to stock market-based investments, to register with NASD and the Securities and Exchange Commission.
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SALES OF INDIVIDUAL ANNUITIES BY DISTRIBUTION CHANNELS,
2003 AND 2007 (1)
(1) Preliminary.
Source: LIMRA International.
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VARIABLE ANNUITY TOTAL SALES BY DISTRIBUTION CHANNEL, 2007 (1)
(1) As of December 31, 2007.
(2) Regulated by the Financial Industry Regulatory Authority.
Source: Morningstar, Inc.
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NET ASSETS OF VARIABLE ANNUITIES, 1998-2007
($ billions)
Source: Morningstar, Inc.
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