SALES OF
FIXED AND
VARIABLE
ANNUITIES
Fixed
annuities
guarantee
that a
specific sum
of money
will be paid
each period,
generally on
a monthly
basis,
regardless
of
fluctuations
in the value
of the
annuity
issuer's
underlying
investments.
Variable
annuity
payments are
based on the
portfolio of
stocks in
which the
issuer
invests so
that the
monthly
payment may
fluctuate,
depending on
whether the
value of the
investments
goes up or
down.
Annuities
may also be
classified
as
immediate,
which begin
to pay as
soon as the
premium is
received, or
deferred,
which
accumulate
assets
before
payments
begin,
generally at
retirement.
See also
Life
Insurance,
Premiums by
Line section
of chapter 5
http://www.financialservicesfacts.org/financial2/insurance/lhpbl/
and
Convergence,
Insurance
Companies,
chapter 4
http://www.financialservicesfacts.org/financial2/convergence/inscos/
A hybrid
annuity
product is
the equity
index
annuity, a
non-traditional
fixed
annuity. A
specified
rate of
interest
guarantees a
fixed
minimum rate
of interest
like
traditional
fixed
annuities.
At the same
time,
additional
interest may
be credited
to policy
values based
upon
positive
changes, if
any, in an
established
index such
as the S&P
500. The
amount of
additional
interest
depends upon
the
particular
design of
the policy.
They are
sold by
licensed
insurance
agents and
regulated by
state
insurance
departments.
Total sales
reached a
record $14
billion in
2003,
according to
the
Advantage
Compendium.
(See also
Life
Insurance,
Premiums by
Line section
of chapter 5
http://www.financialservicesfacts.org/financial2/insurance/lhpbl/
for a list
of the
leading
writers of
equity index
annuities
sold through
banks.)
(1)
Considerations
are
LIMRA's
estimates
of
the
total
annuity
sales
market.
(2)
Preliminary.
Source:
LIMRA
International.
Variable
annuity
sales
grew
in
2003
by
10.8
percent.
Sales
in
2002
were
up
5.0
percent
from
the
previous
year.
Fixed
annuity
sales
dropped
by
15.2
percent
in
2003.
Total
annuity
sales
fell
1.4
percent
in
2003.
ANNUITY
DISTRIBUTION
SYSTEMS
The
difference
in
distribution
channels
between
fixed and
variable
annuities is
related to
the nature
of the
product.
Variable
annuities
are similar
to stock
market-based
investments
and
therefore
attract a
different
type of
customer
from fixed
annuities,
which tend
to be
associated
with other
fixed rate
products
such as
certificates
of deposit
sold by
banks. In
addition,
state and
federal
regulators
re q u i re
people who
sell
variable
annuities to
register
with the
National
Association
of
Securities
Brokers as
securities
dealers.
Career
agents,
agents who
sell mostly
the products
of a single
life
insurance
company, are
more likely
to sell
variable
annuities
than
independent
agents
because they
have
stronger
ties to the
company
marketing
them.
ASSETS OF
HOUSEHOLDS
Where people
save their
money, how
much they
save, and
where they
look for
investment
returns is
influenced
by many
factors
including
people’s
appetite for
risk, the
state of the
economy, the
investment
products
available,
as well as
incentives
to save,
such as tax
advantages
and matching
funds
provided by
employers
who offer
retirement
plans.
FINANCIAL
ASSETS HELD
BY FAMILIES,
BY TYPE OF
ASSET,
1995-2001
Percent
distribution
of
amount
of
financial
assets
of
all
families
1995
100.0
13.9
5.6
1.3
6.3
15.6
12.7
28.1
7.2
9.2
1998
100.0
11.4
4.3
0.7
4.3
22.7
12.4
27.6
6.4
10.3
2001
100.0
11.5
3.1
0.7
4.6
21.6
12.2
28.4
5.3
12.5
(1)
Families
include
one-person
units.
(2)
Includes
other
types
of
financial
assets,
not
shown
separately.
(3)
Includes
checking,
savings
and
money
market
deposit
accounts;
money
market
mutual
funds;
and
call
accounts
at
brokerages.
(4)
Covers
only
those
stocks
and
bonds
that
are
directly
held
by
families
outside
mutual
funds,
retirement
accounts
and
other
managed
assets.
(5)
Excludes
money
market
mutual
funds
and
funds
held
through
retirement
accounts
or
other
managed
assets.
(6)
Covers
IRAs,
Keogh
accounts,
and
employer-provided
pension
plans.
Employer-sponsored
accounts
are
those
from
current
jobs
[restricted
to
those
in
which
loans
or
withdrawals
can
be
made,
such
as
401(k)
accounts]
held
by
the
family
head
and
that
person's
spouse
or
partner
as
well
as
those
from
past
jobs
held
by
them.
Those
from
past
jobs
are
restricted
to
accounts
from
which
the
family
expects
to
receive
the
account
balance
in
the
future.
(7)
Cash
value.
(8)
Includes
personal
annuities
and
trusts
with
an
equity
interest,
managed
investment
accounts
and
miscellaneous
assets.
(9)
Ranges
listed
below
represent
percentiles
rather
than
income
levels.
A
percentile
is a
statistical
ranking
point.
The
50th
percentile
represents
the
midpoint
of
all
values.
For
example,
at
the
50th
percentile
half
of
the
families
in
the
ranking
fall
above
this
income
level,
and
half
fall
below.
NA=Data
not
available.
Note:
Latest
data
available.
Based
on
surveys
conducted
every
three
years.
Source:
Survey
of
Consumer
Finances,
Board
of
Governors
of
the
Federal
Reserve
System.
Travelers,
Allstate, Encompass, Deerbrook,
Metropolitan, Cumberland Mutual, Allied, AIG Friends Cove
Mutual, Progressive, Harleysville, Safeco,
General Casualty, Foremost,ZurichHartford, Commercial
Protective, Truckers, Hartford, USG, Bristol
West, Philadelphia Ins Co.Auto Insurance,
Homeowners Insurance, RV Insurance, Motorcycle
Insurance, Life InsurancePowersports
Insurance, Business Insurance, Commercial
Vehicle Insurance, Truck InsuranceAccident
Insurance, Disability Insurance, Health
Insurance, Flood Insurance, Aircraft Insurance
