The Real Annuity Story Accumulation VS. Income

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A brand-new year is always a good time to reflect on past data released in the Wink’s Sales & Market Report to see if the hard facts can give us any insight as to what the indexed annuity sales focus will be as the year unfolds. Of particular interest is this question:

Do the sales trends for indexed annuities point to an accumulation or income focus for 2015?

Wink reported that end-of-year sales for indexed annuities reached $38.7 billion in 2013, and this set the bar extremely high for record sales. However, it appears that 2014 wasn’t struggling to keep pace. In fact, 2014’s first three quarters of indexed annuity sales have already surpassed the sales figures for the first three quarters of 2013. At the time this article was written, fourth-quarter sales were still pending, but it appeared that 2014 was easily on target to reach more than $45 billion in indexed annuity sales.

Since 2008, the low interest rates that plagued the indexed annuity industry have had many insurance professionals primarily focusing on the income story with their annuity clients. After all, we can agree that a 7% rollup on an income rider is a more convincing value-add for prospects than perhaps a 3% cap would be.

Recently, indexed annuity product development has shown that times are now changing back toward an accumulation focus. As we wrote about in our November/December article, carriers have been getting more creative and adding new hybrid indices to the indexed crediting methods in their indexed annuities, leading to the recent boom of promoting “uncapped” crediting strategies (but remember that “uncapped” does not mean “unlimited”).

We introduced a hybrid indices category in Wink’s Sales & Market Report in the second quarter of 2014, which represented 31% of indexed annuity sales for the second quarter. In contrast, the hybrid index allocations in third quarter declined slightly to 27.7% of indexed annuity sales.

In the second quarter, we predicted that this accumulation focus of the new hybrid indices may lower the guaranteed lifetime withdrawal benefit (GLWB) election rate, as attention was shifting away from income sales. But surprisingly, after looking at third-quarter 2014 sales, this was not the case. The most recent data we gathered shows that the introduction of hybrid indices, along with the marketing hype, has not resulted in declining GLWB election rates.

In fact, the GLWB election and income commencement rates on indexed annuities both increased in spite of the new focus on accumulation. The second quarter delivered a 63.1% GLWB election rate, which increased to 71.6% in the third quarter (the equivalent of 64.6% of total indexed annuity sales). The income commencement rate went from the second quarter’s mere 5.9% to 6.1%, a noteworthy event, as this marks the highest income commencement rate since fourth-quarter 2011!

Wink’s CEO, Sheryl Moore, noted, “It is surprising to see such a big increase in GLWB elections when there is such a focus on the accumulation story with ‘uncapped strategies.’ Makes you wonder if the focus of third-quarter sales was really on accumulation or not!”

So, will 2015’s indexed annuity sales result in accumulation or income sales? Interest rates remain low, which hints at an income focus, but we continue to see product development giving the accumulation side something to talk about. We know that with your clients’ unique needs, an indexed annuity can be a good solution for either accumulation or income requirements, and it’s exciting to see both of these trends increase. February will reveal both fourth-quarter and year-end 2014 results, so stay tuned — the results should be telling!

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 and Jamie may be reached at

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