Variable annuity sales reached a new record in 2007 and the ongoing appeal of guaranteed living benefits (GLBs) played a key role in their success.
In 2007, for new contracts offering at least one GLB, a GLB was elected in 77% of sales premium, according to a study by LIMRA International, which has tracked the rate at which GLBs are elected since the beginning in the first quarter, 2006.
In 2007, the overall election rate rose slightly during the year, from 75% in the first quarter to 79% in the fourth quarter.
Industry deferred VA sales reached $183.9 billion in 2007. This figure includes all subsequent payments into existing VA contracts, most often associated with employer-sponsored plans. If subsequent payment sales premium is excluded, the new deferred VA sales for 2007 would be an estimated $141.3 billion.
GLBs come in a wide variety:
–Guaranteed lifetime withdrawal benefits (GLWBs)
–Guaranteed minimum withdrawal benefits (GMWBs)
–Guaranteed minimum income benefits (GMIBs)
–Guaranteed minimum accumulation benefits (GMABs)
–Hybrid GLBs (in which more than one GLB is combined in a single-fee structure).
GLBs are increasingly common in VA sales. More companies are rolling out products with GLB features, and companies with GLB riders are making enhancements to existing riders and offer them on a larger portion of their existing suite of products.
During 2007, about 91% of new VA sales–or $128.4 billion–were of contracts in which a GLB was available. By applying the 77% election rate from the study to the estimated $128.4 billion in which a GLB was available industry wide, the determination can be made that $98.8 billion in sales premium was associated with elected GLBs riders, representing over half of all VA sales during the period.
Election rates are based on sales in which the GLB is elected compared to sales in which the GLB is available at the contract level (see Figure 1). The percentages do not add up to the 77% that elect any GLB because every contract does not offer every type of GLB. These rates are based on a constant group of 20 companies whose total new VA sales, in which a GLB was available, equaled nearly $120 billion, or 93% of the $128.4 billion industry figure.