The skinny on variable annuities

By Staff Writer

February 18, 2010 at 07:00 PM

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Here is a quick snapshot of variable annuities and what you can look for in 2010 regarding sales, product development and regulatory issues, with original reporting from contributing writer David Port.

Sales and marketing: (Statistics from the Insured Retirement Institute in Washington, D.C.)

? Overall, sales were flat throughout 2009: $30.4 billion in the first quarter, $31.8 billion in the second and $31 billion in the third.

? Third quarter sales were down compared to sales during the same period in 2008 ($37.8 billion).

? Advice from the experts: "Advisors can build a compelling case for a variable annuity by showing clients how their assets would have performed during the recent market plunge had they resided in a variable contract protected by some kind of principal guarantee."

Product development:

? 90 percent of buyers purchase some sort of living benefit rider with their contract.

? Living benefits generally cost more and come with less rich benefits than they did 18 months ago, mainly because insurers have moved to de-risk those features to make them sustainable over the long term.

? New products include next-generation income guarantees investors can purchase with a variable annuity.

? The group retirement account market is an area expected to grow. Insurers are likely to target retirement plan rollover candidates with low-fee, annuity-like withdrawal guarantees that afford downside protection and guaranteed income.

Regulatory and government policy developments:

? Due to the overhaul of the federal financial regulatory system, there is a lot of uncertainty in the overseeing of variable annuities.

? Producers in this area are advised to stay abreast of changes in financial regulatory reform and of state and federal policies dictating capital and reserve requirements for manufacturers that provide variable annuities.

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