It’s been a so-so stretch for variable annuity (VA) sales. According to LIMRA Secure Retirement Institute, VA sales fell 5 percent in 2014’s second quarter, totaling $36.2 billion. Year-to-date, VA sales reached $70.4 billion, a 4 percent drop from 2013.
One factor behind that trend could be issuers’ shift away from guaranteed living benefits (GLBs).
According to LIMRA Secure Retirement Institute, “many of the top VA sellers are focusing on diversification of their VA GLB business. In the second quarter, a few of the top companies entered the market with accumulation focused product without a GLB rider.”
That doesn’t mean buyers don’t want GLBs: The Institute notes “Election rates for GLB riders, when available, were 78 percent in the second quarter of 2014.”
When VAs Work
The demand for GLBs shows that the investors still perceive a benefit in the riders. And in the right circumstances GLBs make sense, such as in the case of a client about to retire, says Jason Dudum of Dudum Financial and Insurance Services Inc. in Lafayette, California. When Dudum recommends VAs he typically uses the GLB riders, he explains, because he’s using the annuities for income. He cites the example of a client with $1 million in retirement plan assets who estimates his fixed monthly expenses to be $5,000. The client’s pension and Social Security benefit will cover $3,000 of that amount.