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March 12, 2006 at 03:00 PM
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.
