Consumers’ Interest in Guaranteed Living Benefits Remains Strong in 2009, LIMRA reports

WINDSOR, Conn., Mar. 5, 2010 — The rate of election for guaranteed living benefits (GLBs), when offered, was 84 percent, in the fourth quarter of 2009, according to LIMRA’s annuity study.

After four consecutive quarters at 89 percent or higher, overall election rates dipped because of a decline of the election of guaranteed lifetime withdrawal benefit (GLWB) rider, although the GLWB market share remained high. The next largest type of GLB, the guaranteed minimum income benefit (GMIB) rider, increased sales in the fourth quarter.

“Especially in this shaky economy, consumers are choosing security through GLBs,” said Dan Beatrice, senior analyst, LIMRA Retirement Research. “Despite companies’ efforts to de-risk benefit riders, lowering their comparative attractiveness, 80 percent of new VA sales premium during the year went into contracts in which a GLB was elected.”

GLBs were elected in contracts representing $18.2 billion of new deferred variable annuity (VA) premium in the fourth quarter.

Nearly three-quarters of sales premiums went into contracts in which a GLWB rider was elected, when any GLB was elected in the fourth quarter of 2009. GLWB asset growth has outpaced the other types of living benefits and by the end of 2009 comprised nearly half of all VA assets with GLB.

VA assets with GLB attached increased 41 percent from $292 billion at the beginning of 2009 to $411 billion at the end of 2009, while total VA assets increased 21 percent from $1.151 trillion to $1.389 trillion during the same period. The reason why 2009 growth of VA assets with GLBs attached have exceeded non-GLB asset growth are primarily the high election rates by buyers in new VA purchases. In addition, a high proportion of VA contracts with GLBs are still within their surrender charge period, which would serve as a disincentive to surrender the contract. Older contracts that have low or no surrender charges tend not to have GLBs.

LIMRA’s Variable Annuity Guaranteed Living Benefit Election Tracking Survey collects VA GLB sales, election rates, and assets on a quarterly basis. The 26 survey participants represent 95 percent of fourth quarter 2009 industry sales in which a GLB was elected, in 188 variable annuity contracts that offered a GLB.

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LIMRA is a worldwide research, consulting and professional development organization that helps more than 850 insurance and financial services companies in 73 countries increase their marketing and distribution effectiveness. Visit LIMRA at www.limra.com.