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Equity-Based Insurance Guarantees Conference Nov. 11-12, 2019
Chicago, IL
A Shifting Landscape in the Individual Annuity Market
Todd GiesingTeddy Panaitisor
SOA Antitrust Compliance Guidelines SOA Presentation Disclaimer
Sponsored by
A Shifting Landscape in the Individual Annuity MarketTODD GIESING & TEDDY PANAITISOR
LIMRA SECURE RETIREMENT INSTITUTE
11 NOVEMBER 2019
8:30 – 9:30 AM
2
3
Todd GiesingDirector, Annuity ResearchLIMRA Secure Retirement Institute
Teodor (Teddy) PanaitisorSenior Research AnalystLIMRA Secure Retirement Institute
4
Confusion
Uncertainty
Doubt
5
6
7
Understanding the past
9
$257 $265$239
$222$238
$220 $230 $237 $236$222
$204
$234
$184$156
$128 $140$158 $147 $146 $141 $134
$107 $98 $100$73
$109 $111
$82 $80 $72$84
$96 $102
$116 $105
$134
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019(EST)Total Variable Fixed
$238-
$254
Individual Annuity Sales 2008-2019
$142-$154
$95-$100
Source: LIMRA Secure Retirement Institute (Dollars in billions)
10
$157.9 $147.4 $145.6 $140.5 $134.0$106.5 $98.2 $100.2
2011 2012 2013 2014 2015 2016 2017 2018 2019(EST)
Variable Annuity (VA) Sales
$95 -$100
Source: LIMRA Secure Retirement Institute (Dollars in billions)
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
Qu
art
erl
y S
ale
s (
bil
lio
ns)
11
GMIB, GMWB, & GMAB riders introduced
“Rider Wars”
GLWB rider introduced
Financial Crisis
“GMIB Max”
Managed Volatility
Funds
Rider pullbacks, sales restrictions, &
buybacks
DOL Fiduciary Rule Proposed
DOL Fiduciary Rule Implemented
Tech Bubble
VA Sales Timeline
Source: LIMRA Secure Retirement Institute (Dollars in billions)
12
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2,400
2,600
2,800
3,000
$0
$10
$20
$30
$40
$50
$60
$70
$80
1990 91 92 93 94 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19
S&P
50
0
Qu
arte
rly
VA
Sal
es (i
n B
illio
ns)
Year
VA Sales S&P 500
VA Sales no longer in sync with equities
Source: LIMRA Secure Retirement Institute (Dollars in billions) & Oxford Economics
13
$106 $96 $84 $77 $68 $48 $38 $41
$25$24 $36 $41 $44
$37 $41 $41
$27$28 $25 $22 $22
$21$19 $18
$158$147 $146 $141 $134
$107 $98 $100
2011 2012 2013 2014 2015 2016 2017 2018 2019(EST)
VA employer plan sales VA sales - No GLB, either not available or elected VA sales - GLB elected
$95 -$100$17 - $18
$36 -$38
$42 -$44
VA Sales By GLB
Source: LIMRA Secure Retirement Institute (Dollars in billions)
14
$1.9 $3.7$7.3
$9.2$11.2
2014 2015 2016 2017 2018 2019 (EST)
$14.5-$15.5
Registered index-linked annuities (RILA)
Source: LIMRA Secure Retirement Institute (Dollars in billions)
15
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
Qu
art
erl
y S
ale
s (
bil
lio
ns)
Total Variable Annuity Sales
VA Sales Less RILA
RILAs have propped up VA growth
If we exclude RILA’s from VA sales, VA’s would have faced a 7th
consecutive year of declines in 2018!
Source: LIMRA Secure Retirement Institute (Dollars in billions)
16
$32.2 $33.9$39.1
$47.8 $53.5 $59.1 $55.0$69.6
2011 2012 2013 2014 2015 2016 2017 2018 2019(EST)
Fixed indexed annuity (FIA) sales$78 -$83
Source: LIMRA Secure Retirement Institute (Dollars in billions)
FIA sales have shifted
17
$18 $21 $22 $28 $29 $32 $26 $29$13 $12 $16
$18 $23 $26 $28$40
$32 $34$39
$48$54
$59 $55
$70
2011 2012 2013 2014 2015 2016 2017 2018 2019(EST)
Indexed employer plan sales Indexed sales - No GLWB, either not available or elected Indexed sales - GLWB elected
$78 -$83
$47 -$49
$30 -$32
Source: LIMRA Secure Retirement Institute (Dollars in billions)
2011
18
FIA - With a GLB
FIA - Without a GLB
56% 42%
Market Share in
Source: LIMRA Secure Retirement Institute (Dollars in billions)
2018
19
FIA - With a GLB
FIA - Without a GLB
56% 42%
Market Share in
Source: LIMRA Secure Retirement Institute (Dollars in billions)
20
What is driving record FIA flows?
21
Will FIA sales overtake VA
sales?
Sort of……
22
VA Sales FIA Sales
$100.2
$69.6
$184.0
$25.0
Total VA versus FIA sales
$102 to $107
$76 to $81
Source: LIMRA Secure Retirement Institute (Dollars in billions)
23
VA RETAIL Sales FIA RETAIL Sales
$81.8
$68.4 $75 to $79
$145.3
$23.7
$87 to $91
RETAIL VA versus FIA sales
Source: LIMRA Secure Retirement Institute (Dollars in billions)
24
25
$68.4
$66.5
VA Retail NEW PREMIUM FIA Retail NEW PREMIUM
$101.4
$36.1
RETAIL VA versus FIA NEW PREMIUM
Source: LIMRA Secure Retirement Institute (Dollars in billions)
26
27
$18.0
$19.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2013 2014 2015 2016 2017 2018 2019
VA Retail New Premium FIA Retail New Premium
$24.7
$7.3
RETAIL VA versus FIA NEW PREMIUM
Source: LIMRA Secure Retirement Institute (Dollars in billions)
28
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Percent of Annuity Sales - VA Percent of Annuity Sales - FIA
29
Top Ten Annuity Manufacturers – 2007
Source: LIMRA Secure Retirement Institute
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Percent of Annuity Sales - VA Percent of Annuity Sales - FIA
30
Top Ten Annuity Manufacturers – Q2 2019 YTD
Source: LIMRA Secure Retirement Institute
31
$34.9
$24.7$29.3 $30.8 $30.9
$38.7$34.2
$45.7
2011 2012 2013 2014 2015 2016 2017 2018 2019(EST)
Fixed-rate deferred (FRD) sales $47 -$52
Source: LIMRA Secure Retirement Institute (Dollars in billions)
32
$17.5 $16.2 $16.4$23.4 $20.7 $19.7
$26.4$38.8 $34.4
$12.2 $10.8 $11.8
$10.0$5.5 $4.7
$9.1
$8.2$8.6
$29.7$27.0 $28.2
$33.4
$26.2 $24.4
$35.5
$47.0$43.0
2011 2012 2013 2014 2015 2016 2017 2018 2019(EST)
Out of Surrender Charge With Charge
Money in motion has increased for FRDs
Source: LIMRA Secure Retirement Institute (Dollars in billions)
$0.2$1.0
$2.2 $2.7 $2.7 $2.8 $2.2 $2.3 $2.4
33
$8.1 $7.7 $8.3$9.7
$9.1 $9.2 $8.3$9.7 $10.0
2011 2012 2013 2014 2015 2016 2017 2018 2019(EST)
Income annuity sales
Source: LIMRA Secure Retirement Institute (Dollars in billions)
Key themes looking forwardRegulatory & Economic Environment will have a substantial impact on the annuity market
Regulatory & economic environment will have the biggest impact on annuity sales over the next 5 years
41
36
$236.9 $235.7$222.1
$203.5
$233.7
$238 to $254 $212 to
$229
$216 to $233
$223 to $239
$230 to $247
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Overall Individual Annuity Sales Fixed Annuity Sales Variable Annuity Sales
Individual annuity sales projections
Source: LIMRA Secure Retirement Institute (Dollars in billions)
37
SEC Regulation Best Interest
NYDFS Suitability & Best Interest Regulation for Life and Annuities
On the regulatory forefront
38
Uncertainties moving forward
DOL Fiduciary Rule 2.0
Individual States – Best Interest / Fiduciary Regulation
39
40
1.52%0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
1962 1967 1972 1977 1982 1987 1992 1997 2002 2007 2012 2017
Interest rate risk is real for manufacturers and consumers
Source: U.S Treasury
2020 2021 2022 2023
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
41
Low for long is the outlook
Source: U.S Treasury & Oxford Economics
42
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
Trea
sury
Yie
ld %
U.S. Treasury Yields
3 mo 1 yr 3 yr 5 yr 10 yr 30 yr
As of 10/07/19
30-yr 2.05%10-yr 1.56%5-yr 1.38%3-yr 1.41%1-yr 1.64%3-mo 1.75%
The yield curve is much different this time
47
Source: U.S Treasury
43
Expected impact to the VA market
Source: LIMRA Secure Retirement Institute (Dollars in billions)
44
Expected impact to the FIA market
Source: LIMRA Secure Retirement Institute (Dollars in billions)
Key themes looking forwardGuaranteed income sales will grow, but not as fast as accumulation products
Americans buy annuities to layer on protection
51
Source: LIMRA Secure Retirement Institute
Accumulation Income Later Income Now
47
$60 $60$82 $90 $99 $101 $102
$125
$119 $115$106 $107 $97 $81 $65
$71
$7.6 $7.7
$8.3$9.7 $9.1
$9.2
$8.3
$9.7
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Accumulation Income Later Income Now
Growth will be minimal over the next 5 years
Source: LIMRA Secure Retirement Institute (Dollars in billions)
48
# of Americans age 55+
201178.9 million
by 2023103.1 million
201894.4 million
Source: Oxford Economics Source: Oxford Economics
49
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
2010 2011 2012 2013 2014 2015 2016 2017 2018
S&P
50
0
Are people nearing or entering retirement getting too comfortable the same pattern of returns will continue?
Source: Yahoo Finance
50
SPIA BUYERS
71.6 72.1 72.0
2016 2017 2018
Average Age
VA GLB BUYERS
61.862.9 63.1
2016 2017 2018
Average Age
FIA GLB BUYERS
62.463.0 63.2
2016 2017 2018
Average Age
DIA BUYERS
59.160.0
61.7
2016 2017 2018
Average Age
Source: LIMRA Secure Retirement Institute
51
Are Americans taking a risky bet on when to add
guaranteed lifetime income
to their portfolio?
52
Jan 1968
Apr 1968
Jul 1968
Oct 1968Jan 1969
Apr 1969
Jul 1969
Oct 1969
Jan 1970Apr 1970
$0k
$500k
$1,000k
$1,500k
62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92
Source: LIMRA Secure Retirement Institute analysis. The portfolio has an asset allocation of 42.5% large company stocks, 17.5% small company stocks, and 40% intermediate-term government bonds and is rebalanced annually. The initial withdrawal amount was $1,686 per month, or for the first year $20,235 or 4.05% of beginning assets. The individual retiree withdrew the same dollar amount within each calendar year, and adjusted annually for the prior calendar year’s inflation rate.
Retirement outcomes are unpredictable
53
Source: LIMRA Secure Retirement Institute
54
Dear Advisor,
The 5 most valuable
services are …
Minimize risk of running
out of money
Protect portfolio pincipal
Minimize taxes
Have a more realistic
picture of life I can afford in
retirement
Maintain perspective and think clearly of events/ trends
42%
Most Valued Advisor ServicesPercent of pre-retirees
32%27% 26% 25%
Source: LIMRA Secure Retirement Institute
55
Around $30 billion was paid in
guaranteed income in 2018!Source: LIMRA Secure Retirement Institute
Key themes looking forwardUnderstanding where assets will flow
$1.3 trillion!
will leave deferred annuity products in the next 5 years
Source: LIMRA Secure Retirement Institute
67
58
Indexed
Fixed-Rate Deferred
Variable
Cumulative Deferred Annuity Outflows 2019-2023 (billions)
$800-$850
$200 - $225
$265 - $285
More money is leaving then entering
Source: LIMRA Secure Retirement Institute (Dollars in billions)
59
$15.7
$51.8 $55.1
$17.6$9.7
-$19.2 -$21.4 -$21.8
-$9.2-$15.6
-$58.4
-$44.7
-$25.9
-$66.5-$62.6
-$46.4-$42.6
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
More money is leaving then entering
Source: LIMRA Secure Retirement Institute (Dollars in billions)
60
U.S. Retirement Milestones
AGE 55If retired, may withdraw 401(k)
savings without penalty
AGE 59½ Can withdraw tax-deferred assets
without IRS penalty
AGE 62Partial Social Security benefit
eligibility
AGE 65 Medicare benefit eligibility
AGE 66-67 Full Social Security benefit eligibility
AGE 70Maximum Social Security benefit
eligibility
AGE 70½ Must take RMD (required minimum
distribution)
Help clients at key retirement milestones
Source: LIMRA Secure Retirement Institute
61
62
LIMRAAdvancing the financial services industry by
empowering our members with knowledge, insights,
connections and solutions
63
64
Todd GiesingDirector, Annuity Research
LIMRA Secure Retirement Institutetgiesing@limra.com
860-285-7899
Teodor (Teddy) PanaitisorSenior Research Analyst
LIMRA Secure Retirement Institutetpanaitisor@limra.com
860-285-7894
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