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 example, the equity indexed annuity, is a hybrid of the features of fixed and variable annuities. It credits a minimum rate of interest, just as other fixed annuities do, but its value is also based on the performance of a specified stock index—usually computed as a fraction of that index’s total return. The financial services overhaul enacted into law in July 2010 included language keeping equity indexed annuities under state regulation. Variable annuities are subject to both state insurance regulation and federal securities 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____.)

PREMIUMS BY LINE

Measured by premiums written, annuities are the largest life/health product line, followed by life insurance and health insurance (also referred to in the industry as accident and health). Life insurance policies can be sold on an individual, or "ordinary," basis or to groups such as employees and associations. Accident and health insurance includes medical expense, disability income and long-term care. Other lines include credit life, which pays the balance of a loan if the borrower dies or becomes disabled, and industrial life, small policies whose premiums are generally collected by an agent on a weekly basis.

Sales Of Individual Annuities By Distribution Channels, 2019 And 2023

 

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Source: U.S. Individual Annuities, GLIMPSE Quarterly Reports, LIMRA Secure Retirement Institute.

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INDIVIDUAL ANNUITY SALES BY PRODUCT TYPE, 2011

($ billions)

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(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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