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Annuities - US - May 2010

This report discusses consumers’ awareness and ownership of annuities, as well as perceived benefits and disadvantages when compared to other types of retirement savings products. Key trends are emerging in the industry because of the economic crisis. Because of this, marketing messages must do a good job of simplifying communications with consumers as one strategy in rebuilding trust in these types of products.

Also explored in this report:

  • The impact of the economy on consumers’ retirement plans
  • The competitive landscape, including current sales of annuities by company in 2009, and major industry trends such as the flight from variable to fixed annuities as a reaction to the turbulence on Wall Street in late 2008 and early 2009
  • Innovation in product features like new variable and fixed annuity products becoming more consumer-friendly
  • Consumers’ perceptions of, and experiences with, annuity products, including overall awareness of annuities, ownership by type of annuity, and the different reasons why annuities were purchased, how the annuities were obtained, and the benefits and disadvantages associated with annuity products

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Table of contents

  1. Scope and Themes

      • What you need to know
        • Data sources
          • Consumer survey data
            • Abbreviations and terms
              • Abbreviations
                • Terms
                  • Companies mentioned in this report:
                  • Executive Summary

                    • Industry overview
                      • Annuities sales down 11% in 2009, due to lower variable annuity sales
                        • MetLife strengthens its position, Prudential makes huge gains in variable annuities
                          • New products are moving through the pipeline
                            • Partnering through website interaction becoming more popular
                              • There is a certain uneasiness about retirement planning
                                • Figure 1: Retirement assets in trillions, by product line, graph, 2007 and 2008
                                • Figure 2: Worker confidence in having enough money to live comfortably throughout their retirement years, 1993-2010
                              • Only 14% of consumers own annuities
                                • A 3.8% tax on annuities to help pay for healthcare
                                • Insights and Opportunities

                                  • Key points
                                    • Keep it simple
                                      • A new retirement landscape may appear, or how 75 will become the new 65
                                      • Inspire Insights

                                          • Trend: Living Better, Longer
                                            • Trend: Simplification and the Customer Experience
                                            • Market Size and Forecast

                                              • Key points
                                                • Total annuity DWP grew modestly in 2008
                                                  • Figure 3: Annuities direct written premium, at current prices, 2003-08
                                                  • Figure 4: Annuities direct written premium, at 2008 inflation-adjusted prices, 2003-08
                                                • 2008 and 2009 were not kind to variable annuities
                                                  • Figure 5: Individual annuity sales, at current prices, 2000-09
                                                  • Figure 6: Individual annuity sales, at 2009 inflation-adjusted prices, 2000-09
                                                • Nearly all annuities are deferred
                                                  • Figure 7: Annuity sales, by product type—variable annuities, 2008
                                                  • Figure 8: Annuity sales, by product type—fixed annuities, 2008
                                              • Competitive Context

                                                • Key points
                                                  • Retirement assets fell by 22% in 2008
                                                    • Figure 9: Retirement assets in trillions, by product line, data chart, 2000-08
                                                • Segment Performance

                                                  • Key points
                                                    • Individual annuities account for lion’s share of the market
                                                      • Figure 10: Total U.S. annuities direct written premium, 2008
                                                      • Figure 11: Annuities direct written premium, at current prices, 2003-08
                                                      • Figure 12: Annuities direct written premium, at 2008 inflation-adjusted prices, 2003-08
                                                      • Figure 13: Annuity considerations, 2001-08
                                                      • Figure 14: Annuity benefit payments, 2007 and 2008
                                                      • Figure 15: Reserves for annuity contracts, 2007 and 2008
                                                  • Marketing Channels

                                                    • Key point
                                                      • Financial planners taking larger slice of annuity market
                                                        • Figure 16: Sales of individual annuities, by distribution channel, 2003-08
                                                        • Figure 17: Variable annuity total sales, by distribution channel, 2007
                                                      • Consumers buy annuities through a number of channels
                                                        • Figure 18: How annuities are obtained, by gender and age, February 2010
                                                        • Figure 19: How annuities are obtained, by household income and education, February 2010
                                                        • Figure 20: How annuities are obtained, by type of annuity owned, February 2010
                                                    • Market Drivers

                                                      • Key points
                                                        • By 2015, 6.6 million Baby Boomers will be 65+
                                                          • Figure 21: U.S. population, by age, 2005-15
                                                        • But are the Baby Boomers ready for retirement?
                                                            • Figure 22: Percent in each group who have considered delaying retirement, among full-time employed, 2009
                                                            • Figure 23: Whether considered delaying retirement—50-64 year olds in full-time employment, 2009
                                                          • The recession is still taking its toll
                                                            • Figure 24: Total non-farm payroll losses or gains, in thousands, September 2007-March 2010
                                                            • Figure 25: U.S. unemployment rate, by month, September 2007-March 2010
                                                          • 44 economists talk about the future
                                                            • President Obama sees annuities as an answer
                                                            • Leading Companies

                                                              • Key points
                                                                • MetLife strengthens its lead in individual annuities; AIG falls to fifth place among top competitors
                                                                  • Figure 26: Top 20 companies, by total individual annuity sales, 2008 and 2009
                                                                • Prudential Annuities leads for variable annuities, closely followed by MetLife
                                                                  • Figure 27: Top 20 companies, by individual variable annuity sales, 2008 and 2009
                                                                • New York Life toppled AIG in fixed annuities
                                                                  • Figure 28: Top 20 companies, by individual fixed annuity sales, 2008 and 2009
                                                                • Allianz and Aviva lead in indexed annuities
                                                                  • Figure 29: Top ten producers of equity index annuities, by total sales, 2007
                                                                • Sun Life and Jackson continue to perform well into 2009
                                                                  • Recent developments at AIG
                                                                  • Brand Qualities

                                                                    • Key points
                                                                      • Little can replace brand equity, especially in turbulent times
                                                                        • Confidence in the financial industry is quite low
                                                                          • Figure 30: Level of confidence consumers have in various institutions, December 2009
                                                                      • Innovation and Innovators

                                                                        • Key points
                                                                          • MetLife Growth and Guaranteed IncomeSM Deferred Variable Annuity
                                                                            • John Hancock AnnuityNote Variable Annuity
                                                                              • Jackson’s Perspective Rewards Variable Annuity
                                                                                • Aviva NEW MultiChoiceSM Annuity Series
                                                                                  • Pacific Frontiers II Fixed Annuity
                                                                                    • Lincoln MYGuaranteeSM Plus Fixed Annuity
                                                                                      • Lincoln GrowSmartSM Fixed Annuity
                                                                                        • Prudential Annuities retirementredzone.com
                                                                                          • AXA’s myretirementshop.com
                                                                                            • Hellowallet.com
                                                                                              • Social Media—myretirement.org
                                                                                                • Longevity Insurance
                                                                                                  • Long Term Care Annuities
                                                                                                  • Advertising and Promotion

                                                                                                    • Key points
                                                                                                      • Overview
                                                                                                        • Print advertising
                                                                                                          • Figure 31: Prudential Retirement Red Zone print ad, March 2010
                                                                                                          • Figure 32: Fidelity and MetLife Deferred Variable Annuity print ad, April 2010
                                                                                                          • Figure 33: New York Life Optimal Fixed Annuity print ad, October 2009
                                                                                                        • Direct mail
                                                                                                          • Figure 34: New York Life/AARP Lifetime Income Plan with Cash Refund direct mail ad, November 2009
                                                                                                          • Figure 35: USAA Extended Guarantee Savings Annuity direct mail ad, November 2009
                                                                                                          • Figure 36: Fidelity 5-Year Fixed Deferred Annuity direct mail ad, July 2009
                                                                                                        • Email
                                                                                                          • Figure 37: American General Life Companies Indexed Annuity email ad, March 2010
                                                                                                          • Figure 38: Retirement Cornerstone Product Launch from AXA Equitable email ad, January 2010
                                                                                                        • TV commercials
                                                                                                          • Figure 39: AXA Equitable Variable Annuity with Changing Interest Rates, 2010
                                                                                                          • Figure 40: Fidelity Investments Annuities with Guarantees, 2009
                                                                                                          • Figure 41: Metlife.com Snoopy Flies Plane, 2009
                                                                                                          • Figure 42: Sun Life Financial, Name Change of KC and Sunshine Band, 2009
                                                                                                      • The Consumer—Annuity Ownership

                                                                                                          • Key points
                                                                                                            • 14% of consumers own annuities
                                                                                                              • Figure 43: Awareness and ownership of annuities, by age, February 2010
                                                                                                              • Figure 44: Awareness and ownership of annuities, by gender and age, February 2010
                                                                                                              • Figure 45: Awareness and ownership of annuities, by household income, February 2010
                                                                                                              • Figure 46: Awareness and ownership of annuities, by education, February 2010
                                                                                                              • Figure 47: Types of annuities owned, by gender and age, February 2010
                                                                                                              • Figure 48: Types of annuities owned, by household income and education, February 2010
                                                                                                            • Annuities are preferred for their safety and predictability
                                                                                                              • Figure 49: Positive attributes of annuities, by gender and age, February 2010
                                                                                                              • Figure 50: Positive attributes of annuities, by type owned, February 2010
                                                                                                            • Being locked in is the major hurdle for one in three owners
                                                                                                                • Figure 51: Negative attributes of annuities, by gender and age, February 2010
                                                                                                                • Figure 52: Negative attributes of annuities, by household income and education, February 2010
                                                                                                                • Figure 53: Negative attributes of annuities, by type owned, February 2010
                                                                                                              • Adviser/agent recommendations are leading reason why bought
                                                                                                                  • Figure 54: Reasons annuity was purchased, by gender and age, February 2010
                                                                                                                  • Figure 55: Reasons annuity was purchased, by household income and educaiton, February 2010
                                                                                                                  • Figure 56: Reasons annuity was purchased, by type owned, February 2010
                                                                                                                • Significant concerns about the financial stability of insurers…
                                                                                                                    • Figure 57: Concern with financial stability of the company that holds annuity, by gender and age, February 2010
                                                                                                                    • Figure 58: Concern with financial stability of the company that holds annuity, by household income and education, February 2010
                                                                                                                  • …but consumers readily see advantages to owning annuities
                                                                                                                    • Figure 59: Attractiveness of annuity features, by gender and age, February 2010
                                                                                                                    • Figure 60: Attractiveness of annuity features, by household income, February 2010
                                                                                                                    • Figure 61: Attractiveness of annuity features, by education, February 2010
                                                                                                                  • 40% would support rollovers of 401(k)s into annuities
                                                                                                                      • Figure 62: Interest in rollover into annuities with tax incentive, by gender and age, February 2010
                                                                                                                      • Figure 63: Interest in rollover into annuities with tax incentive, by household income, February 2010
                                                                                                                      • Figure 64: Interest in rollover into annuities with tax incentive, by education, February 2010
                                                                                                                    • Future trends
                                                                                                                    • The Consumer—Value of Annuities Owned

                                                                                                                      • Key points
                                                                                                                          • Figure 65: Value of annuities owned, April 2008-June 2009
                                                                                                                          • Figure 66: Value of annuities owned, by gender, April 2008-June 2009
                                                                                                                          • Figure 67: Value of annuities owned, by age, April 2008-June 2009
                                                                                                                          • Figure 68: Value of annuities owned, by household income, April 2008-June 2009
                                                                                                                          • Figure 69: Value of annuities owned, by region, April 2008-June 2009
                                                                                                                      • Cluster Analysis

                                                                                                                          • Variables
                                                                                                                            • Characteristics
                                                                                                                              • Predictables
                                                                                                                                • Characteristics
                                                                                                                                  • All Fixed
                                                                                                                                    • Characteristics
                                                                                                                                      • Characteristic tables
                                                                                                                                        • Figure 70: Annuity owner clusters, February 2010
                                                                                                                                        • Figure 71: Positive attributes of annuities, by annuity owner clusters, February 2010
                                                                                                                                        • Figure 72: Negative attributes of annuities, by annuity owner clusters, February 2010
                                                                                                                                        • Figure 73: Reasons annuity was purchased, by annuity owner clusters, February 2010
                                                                                                                                        • Figure 74: Channel used to purchase annuity, by annuity owner clusters, February 2010
                                                                                                                                        • Figure 75: Types of annuities owned, by annuity owner clusters, February 2010
                                                                                                                                        • Figure 76: Concern with financial stability of company that issued annuity, by annuity owner clusters, February 2010
                                                                                                                                        • Figure 77: Potentially appealing features of annuities, by annuity owner clusters, February 2010
                                                                                                                                        • Figure 78: Interest in rollover into annuities with tax incentive, by annuity owner clusters, February 2010
                                                                                                                                      • Demographic tables:
                                                                                                                                        • Figure 79: Annuity owner clusters, by gender, February 2010
                                                                                                                                        • Figure 80: Annuity owner clusters, by age, February 2010
                                                                                                                                        • Figure 81: Annuity owner clusters, by household income, February 2010
                                                                                                                                        • Figure 82: Annuity owner clusters, by marital status, February 2010
                                                                                                                                        • Figure 83: Annuity owner clusters, by education, February 2010
                                                                                                                                        • Figure 84: Annuity owner clusters, by employment, February 2010
                                                                                                                                      • Cluster methodology
                                                                                                                                      • Appendix: Simmons Mosaic Analysis

                                                                                                                                          • Key points
                                                                                                                                            • Figure 85: Ownership of annuities, by Mosaic segment, Spring 2009
                                                                                                                                            • Figure 86: Value of annuities owned, by Mosaic segment, Spring 2009
                                                                                                                                        • Appendix: Trade Associations

                                                                                                                                          Companies Covered

                                                                                                                                          • American Association of Retired Persons (AARP)
                                                                                                                                          • American Council Of Life Insurers
                                                                                                                                          • Ameriprise Financial Inc.
                                                                                                                                          • AXA (USA)
                                                                                                                                          • Employee Benefit Research Institute
                                                                                                                                          • Federal Deposit Insurance Corporation
                                                                                                                                          • Financial Industry Regulatory Authority (FINRA)
                                                                                                                                          • Greenfield Online
                                                                                                                                          • Insurance Information Institute Inc.
                                                                                                                                          • Investment Company Institute
                                                                                                                                          • Jackson National Life Insurance Company
                                                                                                                                          • John Hancock Financial Services, Inc
                                                                                                                                          • MetLife, Inc.
                                                                                                                                          • National Association for Variable Annuities (NAVA)
                                                                                                                                          • National Association of Insurance and Financial Advisors (NAIFA)
                                                                                                                                          • National Association of Insurance Commissioners (NAIC)
                                                                                                                                          • Nationwide Financial Services, Inc.
                                                                                                                                          • Pacific Life Insurance Company
                                                                                                                                          • Prudential Financial, Inc
                                                                                                                                          • Sun Life Financial Inc.
                                                                                                                                          • U.S. Bureau of Labor Statistics

                                                                                                                                          Annuities - US - May 2010

                                                                                                                                          £3,199.84 (Excl.Tax)