Facts + Statistics: Annuities

Annuities

Annuities play an important role in retirement planning by helping individuals guard against outliving their assets. In the most general sense, an annuity is an agreement for an entity (generally a life insurance company) to pay another entity a series of payments. While there are many types of annuities, key features can include tax savings, protection from creditors, investment options, lifetime income and benefits to heirs. A July 2011 Government Accountability Office (GAO) report highlights the role annuities can play in helping people secure enough income during retirement. 

Fixed and variable annuities

Among the most common annuities are 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. In contrast, variable annuity account values and payments are based on the performance of a separate investment portfolio, thus their value may fluctuate daily.

There is a variety of fixed annuities and variable annuities. One type of fixed annuity, the equity indexed annuity, contains features of fixed and variable annuities. It provides a base return, just as other fixed annuities do, but its value is also based on the performance of a specified stock index. The return can go higher if the index rises. The 2010 Dodd-Frank Act included language keeping equity indexed annuities under state insurance regulation. Variable annuities are subject to both state insurance regulation and federal securities regulation. Fixed annuities are not considered securities and are only subject to state insurance 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.

Annuities can be used to fund structured settlements, arrangements in which an injury victim in a lawsuit receives compensation in a number of tax-free payments over time, rather than as a lump sum.

Individual Annuity Considerations, 2013-2017 (1)

($ billions)

      Total
Year Variable Fixed Amount Percent change
from prior year
2013 $145.4 $84.4 $229.8 4.6%
2014 140.1 96.9 237.0 3.1
2015 133.0 102.7 235.7 -0.5
2016 104.7 117.4 222.1 -5.8
2017 98.2 105.3 203.5 -8.4

(1) Based on LIMRA's estimates of the total annuity sales market. Includes some considerations (i.e., premiums) that though bought in group settings involve individual buying decisions.

Source: LIMRA.

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  • Individual variable annuity sales in the United States fell 6.2 percent in 2017, slower than the 21.3 percent drop the previous year. Fixed annuity sales fell faster at 10.3 percent in 2017, after rising 14.3 percent in 2016.

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, 2013 And 2017

 

Source: U.S. Individual Annuity Yearbook - 2017, LIMRA Secure Retirement Institute.

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Deferred Annuity Assets, 2008-2017

($ billions, end of year)

(1) Not reported before 2010.

Source: LIMRA Secure Retirement Institute.

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Individual Immediate Annuity Sales, 2013-2017 (1)

($ billions)

(1) Includes variable individual annuities sales which were less than $0.1 billion.
(2) 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.

Source: LIMRA Secure Retirement Institute.

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Top 10 Writers Of Group Annuities By Direct Premiums Written, 2017

($000)

Rank Group/company Direct premiums written Market share (1)
1 Voya Financial Inc. $11,528,316 16.6%
2 TIAA 7,497,430 10.8
3 Prudential Financial Inc. 6,837,996 9.8
4 MetLife Inc. 5,401,231 7.8
5 American International Group 3,885,638 5.6
6 Great-West 3,847,504 5.5
7 Lincoln Financial 3,838,742 5.5
8 OneAmerica Financial Partners 3,601,007 5.2
9 AXA 3,160,276 4.5
10 Principal Financial Group Inc. 2,779,177 4.0

(1) Based on U.S. total, includes territories.

Source: NAIC data, sourced from S&P Global Market Intelligence, Insurance Information Institute.

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Top 10 Writers Of Annuities By Direct Premiums Written, 2017 (1)

($000)

Rank Group/company Direct premiums written Market share (2)
1 Voya Financial Inc.  $13,717,357 6.9%
2 Prudential Financial Inc.  12,592,804 6.4
3 Lincoln Financial 10,643,705 5.4
4 Northwestern Mutual Life Insurance Co.  10,488,214 5.3
5 MetLife Inc.  9,130,106 4.6
6 Massachusetts Mutual Life Insurance Co.  8,397,127 4.2
7 New York Life Insurance Group  8,280,846 4.2
8 TIAA 8,144,285 4.1
9 American International Group  7,180,410 3.6
10 AXA  6,269,256 3.2

(1) Includes individual and group annuities.
(2) Based on U.S. total, includes territories.

Source: NAIC data, sourced from S&P Global Market Intelligence, Insurance Information Institute.

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