Annuity Market Trends and Opportunities

Transcription

1 Annuity Market Trends and Opportunities Joseph Montminy Assistant Vice President, LIMRA Chris Raham Senior Actuarial Advisor, Ernst & Young This publication is a benefit of LIMRA membership. No part may be shared with other organizations or reproduced in any form without LIMRA s written permission. Agenda Individual Annuity Market Trends Sales by product type Distribution Channels Drivers of Sales Who is Buying Guaranteed Lifetime Income products Annuity Assets Sales Forecast 2 1

2 Dollars in Billions 5/1/2012 Annuity Sales 3 Total Individual Annuity Sales Rebound Fixed Variable $ $220 $219 $221 $ $ $ $ $239 $ $

3 Dollars in Billions Dollars in Billions 5/1/2012 Indexed Annuity Sales Remain At Record Levels While Traditional Fixed-rate Sales Flat Indexed Market value adjusted Book value deferred $93 $95 $98 $79 $77 $68 $65 $66 $69 $ $ Fixed immediate Annuity Sales Hit Record High Variable immediate Structured Settlements Fixed immediate $10.3 $ $11.3 $11.3 $11.6 $ $12.4 $ $14.4 $13.2 $13.4 $ Amounts $0.5 billion or less not shown 6 3

4 Distribution Channels 7 Independent B-Ds Retain Market Share Among VA Distribution Channels Independent B-D Full Service Nat'l B-D Banks Career Independent Agents Direct 100% 80% 60% 40% 9% 10% 12% 12% 11% 21% 23% 24% 24% 24% 14% 12% 10% 11% 12% 21% 18% 18% 18% 19% 20% 0% 29% 31% 32% 33% 33%

5 Independent Agents Dominate Indexed Annuity Sales Independent B-D Full Service Nat'l B-D Banks Career Independent Agnts Direct 100% 80% 60% 89% 88% 84% 86% 86% 40% 20% 0% 6% 5% 6% 6% 5% 4% 4% 7% 7% 6% Banks And Career Agents Capture Majority of Fixed-Rate Deferred Annuity Sales Independent B-D Full Service Nat'l B-D Banks Career Independent Agents Direct 100% 80% 60% 21% 16% 14% 19% 19% 23% 18% 15% 26% 25% 40% 44% 46% 42% 39% 41% 20% 0% 7% 9% 10% 8% 9% 6% 6% 8% 5% 5%

6 Full Service National Broker-Dealers Gain Immediate Annuity Market Share 100% 80% 60% 40% 20% 0% Independent B-D Full Sevice Nat'l B-D Banks Career Independent Agents Direct 35% 33% 19% 21% 19% 34% 32% 31% 30% 26% 15% 14% 14% 8% 9% 15% 19% 22% 12% 10% 6% 9% 10% 8% 8% Drivers of Sales 12 6

7 GLBs Drive VA Sales 2011 VA New Sales In Billions VA GLB Election Rates (When Any GLB Available) Hybrid GLB GMWB GMAB GMIB GLWB GLB Not Available $13 B 11% GLB Not Elected $13 B 12% 89% 90% 89% 89% 87% 87% 88% 89% 87% 88% 88% 88% 90% GLB Available $109 B 89% GLB Elected $96 B 88% 57% 55% 59% 69% 64% 64% 64% 65% 65% 65% 61% 57% 59% 25% 29% 25% 15% 17% 17% 17% 18% 16% 17% 22% 27% 26% 4Q '08 1Q '09 2Q '09 3Q '09 4Q '09 1Q '10 2Q '10 3Q '10 4Q '10 1Q '11 2Q '11 3Q '11 4Q '11 Source: LIMRA, Variable Annuity Guaranteed Living Benefit Election Tracking Survey. 13 Indexed GLWB Election Rates Are Strong 2011 Indexed New Sales In Billions Indexed Annuity GLWB Election Rates (when available) GLWB Not Available $3.1 B 13% GLWB Available $21.3 B 87% GLWB Available - Not Elected $7.3 B 34% GLWB Available - GLB Elected $14.0 B 66% 69% 67% 62% 64% 70% Q Q Q Q Q Data is based on survey results from 21 companies representing 71 percent of industry sales. Source: LIMRA, Indexed Annuity Guaranteed Lifetime Withdrawal Benefit Elections Survey. 14 7

8 Percent 5/1/2012 Continued Decline In Fixed-Rate Annuity Spreads Midmonth Average One-Year Initial Fixed Annuity Credited Rates March, 2012 Average Bonus Credited Rates Average BaseCredited Rates Average 1-year CD Rates Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Source: Kehrer-LIMRA, Kehrer-LIMRA Bank Fixed Annuity RateWatch ; CD rates from bankrate.com 15 Who is Buying Guaranteed Lifetime Income products? 16 8

9 Percent of buyers 5/1/2012 VA GLWBs And GMIBs Have Similar Buyer Profiles Percent of buyers by age GLWB GMIB GMWB GMAB 6.0% 5.0% 4.0% % of buyers under age 65 GLWB 70% GMIB 75% GMWB 58% GMAB 85% 3.0% 2.0% 1.0% 0.0% Age Age of Buyer Source: Guaranteed Living Benefit Utilization Study 2010 Data, LIMRA Note: Based on 392,827 GLWB contracts,128,683 GMIB contracts, 12,642 GMWB contracts and 36,217 GMAB contracts issued in 2010 and still in force at the end of the year. 17 GLWBs And Income Annuities Two Separate Markets Percentage of GLWB and Immediate Income Buyers by Age 6.0% VA w/ GLWB Income Annuity Average Age: VA w/ GLWB 61 Income Annuity % 2.0% 0.0% Age of Buyer Source: Guaranteed Living Benefit Utilization Study 2010 Data, LIMRA 2012 Based on GLWB contracts issued in

10 Overall VA GLWB Utilization Rates Remain Level In 2010 GLWB Overall Utilization of Withdrawals No withdrawal activity 79% Withdrawal activity 21% Systematic withdrawal 72% Non-systematic 28% Source: Guaranteed Living Benefit Utilization Study 2010 Data, LIMRA Note: Based on 1,268,523 contracts issued before 2010 and still in force at the end of VA GLWB Withdrawal Behavior Varies By Source Of Funds After Age 70 GLWB utilization by source of funds and age of owners IRA Nonqualified 80% Percent of Owners taking withdrawals 60% 40% 20% 0% Age <50 Source: Guaranteed Living Benefit Utilization Study 2010 Data, LIMRA Note: Based on 1,268,462 contracts issued before 2010 and still in force at the end of 2010 Age Page 20 10

11 Dollars in Billions 5/1/2012 Annuity Assets 21 Deferred Annuity Assets At Record Levels Variable Fixed $2,220 $2,268 $1,294 $1,255 $1,236 $1, ,016 $1,633 $1,751 1,136 1,231 $1,916 $2,028 $1,707 1,397 1,517 1,151 1,389 1,561 1,593 $2,

12 Annuity Surrenders Decreasing Or Flat Annualized Contract Surrender Rates 9% 8% 7.8% 8.2% Variable Indexed Book-value/MVA 7% 7.6% 7.5% 7.2% 7.1% 6% 5.9% 5.6% 5% 5.1% 4% Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q4 '11 Note: Results based on a constant group of 55 companies. Source: LIMRA, U.S. Annuity Persistency. 23 GLWB Surrender Rates Are The Lowest Among All GLBs VA Assets by Types In Billions VA Surrender Rates In 2010 CAGR= 29% CAGR= 1% CAGR= 8% 9.4% 8.8% $579 $521 $386 $272 $476 $470 $425 $439 $570 $575 $527 $ % 2.6% 3.9% 5.6% GLB assets Non-GLB assets Employer plan assets Non- GLB With GLB GLWB GMIB GMWB GMAB Source: LIMRA, Variable Annuity Guaranteed Living Benefit Election Tracking Survey. Note: Surrender rates are based on contracts issued before Source: Guaranteed Living Benefit Utilization Study 2010 Data, LIMRA

13 Dollars in Billions 5/1/2012 The Future of Annuity Sales 25 Annuity Sales Expected To Grow 2% Over Next 4 Years Fixed Variable CAGR $240 $237 $246 $253 $262 2% % % 2011 (actual)

14 Thank You! Joseph Montminy