Sales of Protection-Oriented U.S. Individual Annuities Continue to Rise
Sales of contracts without any guaranteed living benefits also increased.
Many U.S. life insurers have been favoring sales of annuities with some built-in protection against loss of account value, especially with the rise of stock market volatility.
That trend pushed up sales of what the Secure Retirement Institute classifies as protection-focused annuities in 2020, even as sales of what the organization classifies as income-focused annuities fell sharply.
The Windsor, Connecticut-based organization has published data on how different classes of U.S. individual annuities performed in 2020 in a new look at 2020 annuity issuer survey results. Survey managers say the list of participants includes insurers that account for 96% of the U.S. individual annuity market.
Here’s what happened to sales for the three categories of annuities included in the new analysis:
- Protection-Focused: $107 billion (Up from $104 billion)
- Accumulation-Focused: $28 billion (Up from $27 billion)
- Income-Focused: $60 billion (Down from $82 billion)
Sales of income-focused products have dropped from $114 billion in 2013, and sales of protection-focused products have increased from $48 billion over that same period, according to the survey team.
Investor worries about stock market volatility have helped protection-focused product sales, and low interest rates have hurt income-focused product sales, according to Todd Giesing, a member of the survey team.
Investors who still want products with income guarantees may be putting their money in products such as short-term fixed-rate annuities while waiting for interest rates to increase, Giesing suggested.
Definitions
The annuity sales survey managers classify annuities without living benefits guarantees or living benefits options as accumulation-focused products.
The managers apply the income-focused label to single-premium immediate annuities, deferred income annuities, and products that come with guaranteed living withdrawal benefits riders, guaranteed minimum withdrawal benefits riders or guaranteed minimum income benefit riders.
The protection-focused category includes products such as variable annuities with a guaranteed minimum accumulation benefit, registered index-linked annuities without guaranteed living benefits, non-variable indexed annuities without guaranteed living benefits, and fixed-rate deferred annuities.
(Image: Diego M. Radzinschi/ALM)