SALES OF FIXED AND VARIABLE ANNUITIES
There are two major types of annuities: fixed and variable. Fixed annuities guarantee the principal and a minimum rate of interest. 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 is a variety of fixed annuities and variable annuities. One type of fixed annuity, the equity indexed annuity, contains features of fixed and variable annuities. It provides a base return, just as other fixed annuities do, but its value is also based on the performance of a specified stock index. The return can go higher if the index rises. The 2010 Dodd-Frank Act included language keeping equity indexed annuities under state insurance regulation. Variable annuities are subject to both state insurance regulation and federal securities regulation. Fixed annuities are not considered securities and are only subject to state insurance regulation.
Annuities can be deferred or immediate. Deferred annuities generally accumulate assets over a long period of time, with withdrawals taken 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. Annuities can be written on an individual or group basis. (See the Premiums by Line table, page____.)
Annuities can be used to fund structured settlements, arrangements in which an injury victim in a lawsuit receives compensation in a number of taxfree payments over time, rather than as a lump sum.
INDIVIDUAL ANNUITY CONSIDERATIONS, 2009-2013 (1)
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, accounted for 45 percent of annuity sales in 2011. 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.
DEFFERED ANNUITY ASSETS, 2004-2013
INDIVIDUAL IMMEDIATE ANNUITY SALES, 2009-2013 (1)