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Life Health > Annuities > Variable Annuities

Top 50 Pay Out More In Annuity Benefits

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Net annuity benefits paid by the top 50 annuity writers grew 9% in 2004 over 2003 and at the end of the third quarter seemed poised to grow apace again in 2005.

In 2004, net annuity benefits paid out grew to $48 billion up from $44.1 billion in 2003, according to data from the National Association of Insurance Commissioners Annual Statement database via National Underwriter Insurance Data Services/Highline Data. Year-to-date 2005 results through third quarter for the top 50 totaled $37.3 billion.

An industry expert says one trend that may be affecting annuity benefits paid is the increase in premium financing. Premium financing is a transaction in which a substandard immediate annuity is purchased to pay the premiums on a life insurance policy, creating an arbitrage opportunity.

The question to ask, this expert says, is whether single premium immediate annuity sales are increasing.

At this point, LIMRA data indicates sales of fixed premium immediate annuities are flat, according to Howard Drescher, a spokesperson for LIMRA International, Hartford, Conn. In 2005, sales were $5.3 billion, unchanged from 2004, he says.

The findings from the NUIDS database use the year-to-date 2005 results as a base factor for determining the top 50.

If annuity benefits paid are measured by direct benefits paid that do not take reinsurance transactions into consideration, total benefits paid also grew by 9% to $46.9 billion in 2004 compared with $42.5 billion in 2003.

The growth in annuity benefits paid is confirmed by statistics released by the American Council of Life Insurers, Washington. For all annuity companies, benefit payments grew to $86.1 billion in 2004 compared with $77.5 billion in 2003, according to the ACLI 2005 Fact Book. The $86.1 billion total includes supplementary contracts without life contingencies and annuities certain. If these contracts are excluded, total annuity benefits paid in 2004 were $61 billion.

Individual annuities, according to the ACLI, grew 8.2% to $35 billion in 2004 from $32.4 billion in 2003. And, group annuities increased 5.6% to $26.1 billion from $24.7 billion during the same time period, ACLI says.

For the period from 2001 to 2003, data available from the National Association for Variable Annuities, Reston, Va., found that variable annuity investor beneficiaries received benefits of $2.8 billion more than the value of the annuities.

The growth in annuity benefits paid may be due, in part, to the increase in total net premiums collected. A run of the top 50 companies by total annuity premium, including individual and group annuity premium, indicated a 9.4% increase to $207.3 billion in 2004 from $189.5 billion in 2003.

A ratio of annuity benefits paid out to net annuity premiums suggests a constant of about 23%. In 2004, the ratio was 23.15% compared with 23.27% in 2003.

Premium growth has been driven by demand for such products as variable annuities with guarantees and equity-index annuities.

And as income planning becomes more important in helping consumers prepare for retirement, annuities are one way that consumers can establish systematic withdrawal income programs, according to a report, “SWIPs vs. Lifetime Income: Implications for the Annuity Industry,” issued by LIMRA International, Hartford, Conn., in June 2005. The report found that of 26 reporting companies, 92% offer SWIPs and 26% offer SWIPs through variable annuities with a guaranteed minimum withdrawal benefit.

In addition, the survey found that all of the participating companies offered lifetime annuitization through deferred annuities offered within the nonqualified and IRA markets; 80% of participating companies offered deferred annuities within the qualified markets; and 80% offered immediate annuities.


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