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Annuities in the United States 2010

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Annuities in the United States 2010

Description:    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



Contents:       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
                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
            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



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