Did You Know?
- That, as of the first quarter 2011, the combined net assets of U.S. variable annuities were valued at nearly $1.6 trillion, an 11% increase from first quarter 2010 and the highest level ever recorded?
- In 2010 fixed annuity assets were valued at $659 billion a 6% increase from 2009?
- That in 2010, the total average expense difference between variable annuities and mutual funds was 1.01%?
- In 2011, the contribution limits range from $5,000-$6,000 for an IRA, $16,500-$22,000 for a 401(k) and $200,000 plus for a non-qualified annuity?
- That the average number of funds per variable annuity contract was 50 in 2010, of which 47% of assets were invested in equities, 11% in bonds, and 20% in fixed-rate accounts?
- That the guaranteed lifetime withdrawal benefit was offered on 79% of variable annuities in 2011 and was elected by 65% of contract holders?
- Boomers who own annuities have a higher confidence in retirement expectations, with 92% believing they are doing a good job in preparing for retirement?
High-Level Professional Resources
Third Quarter Variable Annuity Product Changes Slow, But Benefits Trend Toward More Generous
Lifetime GMWB Benefits Garner More Than 60% of New Sales Flows
The Insured Retirement Institute (IRI) today a report on product trend updates within the U.S. variable annuity market. Complied by Morningstar, the report found that variable annuity benefit activity for the third quarter slowed significantly from the robust filings made during the second quarter of this year. In the third quarter, carriers made 40 material changes, down from 162 changes in the second quarter, and down from 106 changes in the same quarter last year. The new filings focus heavily on new share classes and the Lifetime Guaranteed Minimum Withdrawal Benefit (GMWB) benefit, which traditionally garner about 64 percent of new sales flows.
"Second quarter filings are historically the highest of the year, with third quarter changes representing one of the slowest periods of activity, and this year is no exception," said IRI President and CEO Cathy Weatherford. "What has not slowed is the continued move toward increasingly generous benefits, a trend that developed in the months that followed the economic downturn and remains a focus of product development activity today. With variable annuity sales on pace to exceed $150 billion this year, it is clear that consumers are positively responding to the product innovation that has occurred by increasingly placing their trust in insured retirement strategies."
Despite the anticipated slowing of third quarter changes, more than one-third of the filings represented either a new variable annuity contract or a new variable annuity benefit. Carriers continue to experiment with new benefit design, with the trend toward more generous offerings. Benefit structures continued to be shaped to allow for risk control and segmentation of the target investor base. Contrary to the continued move to more robust benefits, variable annuity contract costs have remain steady. Total average expenses remain unchanged from 2010 levels, coming in at 2.49 percent, a figure that is consistent with the five-year average of also 2.49 percent.
The entire report and analysis can be found here.
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