It’s Not All About the GLWBs

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…It’s the guarantees in indexed annuities that really steal the show!

By Victoria Peterson and Jamie Johnson

We recently read a survey of annuity professionals that was conducted during the NAFA IMO Summit in October 2013, revealing the “must have” feature of annuities. Results show nearly 70% of those surveyed agreed that guaranteed lifetime withdrawal benefits (GLWBs) are the must-have feature necessary for today’s annuities.

Looking at just the fixed indexed annuity arena alone, there is certainly no shortage of products offering this “essential” feature. Currently, there are 284 indexed annuities available, and of these, 207 offer a GLWB.

Let us dig deeper. At Wink, we have been tracking the election rate of GLWBs in indexed annuity sales. Wink’s Sales & Market Report reveals that since the fourth quarter of 2009, the rate of election on GLWB riders has accounted for over half of the total indexed annuity sales. We saw the GLWB election rate skyrocket at the end of the fourth quarter of 2012 to a whopping 68.6%. The high election rate indicates that GLWBs were the must-have feature of 2012.

Last year yielded a different outcome. In 2013, there was a steady decline in the rate of election on GLWBs each quarter. Over the course of the year, there was a 6.7% total decline, bringing the fourth quarter’s election rate down to 61.9% of total indexed annuity sales. What is driving the steady election rate decline of the must-have annuity feature?

Rates. Indexed annuity rates have become more attractive over the past year.

For example, let’s take a look at the average cap rate in the annual point-to-point cap crediting strategy over several years. In the last quarter of 2012, the annual point-to-point caps were averaging 3.07%, and in the fourth quarter 2012, it was when we saw the GLWB election rate at its highest. Throughout 2013, caps rose nearly an entire percentage point to average just over 4%. The cap rate increase coincides with the GLWB election rate decline. Coincidence?

Our CEO, Sheryl J. Moore, wasn’t surprised to see the fourth quarter 2013 GLWB elections down to 61.9%. “Rates on indexed annuities are much more attractive than they have been in years, so salespeople are finally able to focus on accumulation sales again, as opposed to income sales,” she noted.

We agree, and other data supports our hypothesis.

Everyone is onboard! Indexed annuities continue to gain acceptance in banks and wire houses, as fixed rates offered by traditional savings vehicles remain low. Sales through these distribution channels for the last quarter of 2013 were 5% higher over the same period in 2012. It’s the guarantees in indexed annuities that consumers go wild for, and the rate increase has brought a stronger accumulation story to the table. Sheryl added, “More attractive rates on these products are increasing sales in independent agent distribution as well – it is win-win for the industry!”

The advantage of being able to focus on accumulation and income sales brought us the fifth consecutive record-setting year in indexed annuity sales at $36.8 billion for 2013. Attractive rates coupled with the must-have feature make it, dare we say, easier than ever to offer these products.

All data is collected by Wink Inc. and published in the quarterly “Wink’s Sales & Market Report.” www.LookToWink.com

NAFA IMO Summit survey results are from 102 independent marketing organization professionals, carriers, independent agents, and vendors surveyed by The Phoenix Companies, Inc., at the National Association for Fixed Annuities 2013 NAFA IMO Summit in Aspen, Colo., which was held Oct. 16-18, 2013.


Victoria Peterson is the VP of Operations and Jamie Johnson is the Communications Specialist at Wink, Inc., a competitive intelligence firm in Des Moines, Iowa, specializing in the life insurance and annuity industries. Together, Victoria and Jamie have more than 15 years of experience working with indexed products and provide market research to financial services professionals, distributors, manufacturers, regulators, and consultants on both a domestic and global basis. Victoria may be reached at Victoria@looktowink.com and Jamie may be reached at Jamie@looktowink.com.

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