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Variable Annuities Attract Premium Deposits in Year 2: Study

By Allison Bell

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Some variable annuity buyers put more cash in during the second year that they own the contract.

About 5% to 6% of the owners of contracts with guaranteed lifetime withdrawal benefits add premium deposits during the second contract year, according to a team of analysts from LIMRA and the Society of Actuaries Research Institute.

For owners of variable annuities with GLWB riders, the percentage who took withdrawals increased to 44% in 2021, from 37% in 2019.

The LIMRA and SOA team put those findings in a new report on what U.S. individual variable annuity holders really did with their annuities from 2019 through 2021.

What it means: Typical clients may find it easier to take cash out of an annuity than to put more money in.

The study: The LIMRA/SOA team based the new report on data from 15 companies with 10.5 million contracts that could be surrendered, $1.4 trillion in contract value that could be surrendered, 3.7 million withdrawals of cash from annuity contracts and $41 billion in contract value withdrawn.

The report includes data on annuities with no living benefit guarantees and guaranteed minimum income benefits, as well as those that let owners take cash out through guaranteed lifetime withdrawal benefit riders.

For companies that did not provide data for the study, the purchase price is $60,000.

Insurers can use the data to design products, price products and improve predictions about how in-force contracts will perform.

The public materials: The team has provided some information on the study summary page and in a general report about the findings.

The average annuity included in the study had about $133,000 in contract value exposed to surrender, and the average contract owner who withdrew cash took out about $11,100.

The survey shows that benefits guarantees increase the odds that owners will keep their contracts. In 2021, for example, the surrender rate was about 13% for contracts with GLWB riders and about 17% for products without any living benefit guarantees.

Credit: Song about summer/Adobe Stock

Allison Bell

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