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Cerulli Sees Stagnation In Annuity Sales

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NU Online News Service, Oct. 12, 4:15 p.m. – Annuity industry growth will stagnate for a period about as long as that of equity markets, but it will be harder for it to recover and reach new ground, according to the The State of the Annuity Industry, a new report from the Boston research firm, Cerulli Associates.

The 190-page report analyzes the changes shaping the annuity industry and discusses opportunities for future expansion.

The annuity industry has nearly reached its full market potential with the current set of product offerings and distribution outlets, Cerulli Associates contends.The challenge for the industry is either to develop fundamentally new products and distribution strategies or negotiate the annuity market from stagnated growth into a hasty decline of dwindling profits and escalating costs, it says.

Between 50% and 80% of an insurers’ annuity book of business aged greater than five years will be exchanged to another insurance carrier or surrendered for another financial product, the report estimates..Few insurers with a large block of aged annuity assets can keep new sales flowing at a pace that offsets redemption activity. Trying to keep a company’s net sales growing will require active involvement by the organization in both increasing new sales and decreasing redemptions, the report concludes.