Variable annuity net new sales will reach $22 billion by 2018, a 57% increase from 2012 levels, according to a recently released report by Cerulli Associates.
“Net new variable annuity sales plummeted in 2012 to just $14 billion,” said Donnie Ethier, associate director at Cerulli, in a statement announcing the findings of Annuities and Insurance 2013: Balancing Shrinking Supply and Increasing Demand for Guarantees. “However, as interest rates stabilize, we envision legacy variable annuity providers and new entrants, including nontraditional players, to join the marketplace.”
Ethier notes that consumer demand for guaranteed income “is too high for firms to ignore, and many believe they can address the opportunity with greater efficiency.”
In order to continue to strengthen net sales and the industry’s producer base, Cerulli emphasizes the need to attain new sources of assets. This, Cerulli says, “may be achieved by attracting fee-based advisors, getting younger generations to consider the solution, or by constructing in-plan guarantees.”
Cerulli notes in its report that while progress in the traditional variable annuity market has been “marginal,” there has been “inspiring product development and reinvention among insurers” in other business lines, including deferred income annuities (DIAs) and structured VAs.