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Retirement Planning > Retirement Investing > Annuity Investing

LIMRA: Consumer Interest in Guaranteed Living Benefits Remains Strong in 2009

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Windsor, Conn. — The rate of election for guaranteed living benefits (GLBs, when offered in a variable annuity (VA), was 84% in the fourth quarter of 2009, according to LIMRA’s annuity study.

After four consecutive quarters at 89% or higher, overall election rates dipped because of a decline of the election of the guaranteed living withdrawal (GLWB) rider, although the GLWB market share remained high.

“Especially in this shaky economy, consumers are choosing security through GLBs,” says Dan Beatrice, senior analyst, LIMRA Retirement Research. “Despite companies’ efforts to de-risk benefit riders, lowering their comparative attractiveness, 80% of new VA sales premium during the year went into contracts in which a GLB was elected.”

GLBs were elected in contracts representing $18.2 billion of new deferred variable annuity (VA) premium in the fourth quarter.

When a GLB was elected in the fourth quarter of 2009, nearly three-quarters of sales premiums went into contracts in which a GLWB rider was elected. GLWB asset growth has outpaced the other types of living benefits and by the end of 2009 comprised nearly half of all VA assets with a GLB.

VA assets with GLBs attached increased 41% from $292 billion at the beginning of 2009 to $411 billion at the end of 2009, while total VA assets increased 21% from $1.151 trillion to $1.389 trillion during the same period. The reason why 2009 growth of VA assets with GLBs attached have exceeded non-GLB asset growth is primarily the high election rates by buyers in new VA purchases. In addition, a high proportion of VA contracts with GLBs are still within their surrender charge period, which would serve as a disincentive to surrender the contract. Older contracts that have low or no surrender charges tend not to have GLBs.

The 26 survey participants represent 95% of fourth quarter 2009 industry sales in which a GLB was elected, in 188 variable annuity contracts that offered a GLB.

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