Annuities

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)

($ billions)

      Total
Year Variable Fixed Amount Percent change
from prior year
2009 $128.0 $110.6 $238.6 -10.0%
2010 140.5 81.9 222.4 -6.8
2011 157.9 80.5 238.4 7.2
2012 147.4 72.3 219.7 -7.8
2013 145.3 84.3 229.6 4.5

(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 buying decisions.

Source: LIMRA Secure Retirement Institute.

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  • Individual variable annuity sales in the U.S. fell 1.4 percent in 2013, following a 6.6 percent drop the previous year. Fixed annuity sales grew 16.6 percent in 2013, after a 10.2 percent drop in 2012.

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 37 percent of annuity sales in 2013. State and federal regulators require sellers of variable annuities to register with NASD and the Securities and Exchange Commission.

 

SALES OF INDIVIDUAL ANNUITIES BY DISTRIBUTION CHANNELS, 2009 AND 2013

Source: U.S. Individual Annuity Yearbook - 2013, LIMRA Secure Retirement Institute.

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INDIVIDUAL ANNUITY SALES BY PRODUCT TYPE, 2011

($ billions)

(1) Single premium contracts bought by property/casualty insurers to distribute awards in personal injury or wrongful death lawsuits over a period of time, rather than as lump sums. Classified as a fixed annuity.

Source: LIMRA International.

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  • Individual annuity sales totaled $240.3 billion in 2011, including $159.3 billion in variable annuities and $81.0 billion in fixed annuities.

 

DEFFERED ANNUITY ASSETS, 2004-2013

($ billions, end of year)

(1) Not reported before 2010.

Source: LIMRA Secure Retirement Institute.

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INDIVIDUAL IMMEDIATE ANNUITY SALES, 2009-2013 (1)

($ billions)

(1) Includes variable individual annuities sales which were less than $0.1 billion.
(2) Single premium contracts bought by property/casualty insurers to distribute awards in personal injury or wrongful death lawsuits over a period of time, rather than as lump sums.

Source: LIMRA Secure Retirement Institute.

View Archived Graphs