Growing demand for registered indexed linked annuities presents opportunitiesResearch & Markets, an industry research organization, has published its 2022 annuity market analysis. Access the report here.
DUBLIN, Aug. 8, 2022 /PRNewswire/ — The US annuity market in 2021 was valued at US$231.63 billion. The market is expected to reach US$298.70 billion by 2026. The term annuity refers to an insurance contract issued and distributed by financial institutions with the intention of paying out invested funds in a fixed income stream in the future. Investors invest in or purchase annuities with monthly premiums or lump-sum payments.
Annuities are appropriate for investors who want stable, guaranteed retirement income. Because invested cash is illiquid and subject to withdrawal penalties, it is not recommended for younger individuals or those with liquidity needs to use this financial product.
Investors wary of increased market volatility and growing inflation drove total US annuity sales to the highest levels since 2008. On the other hand, insurers are also offering consumers better payouts and guarantees on all types of annuities amid rising interest rates, which has resulted in an increase in profits for insurance companies in the past few years. The market is expected to grow at a CAGR of 4.7% during the forecast period of 2022-2026.
Market Segmentation Analysis
By Type: The report provides the bifurcation of the market into two segments based on type: Fixed Annuity and Variable Annuity. In 2021, the fixed annuity accounted for the maximum share of approximately 52% in the US annuity market owing to the protection and growth offered by fixed annuities. A fixed annuity can be an attractive option for conservative investors planning for retirement because these products offer a predictable stream of income. The fixed annuities are further bifurcated based on type (Index Annuity and Traditional Fixed Annuity). An index annuity is expected to grow significantly in the coming years owing to the new market participants, the rationalization of product features, and the opening up of additional distribution channels such as banks.
By Distribution Channel: Fixed annuities are segmented based on distribution channels (Independent Agents, Banks, Regional Broker-Dealers, Independent Broker-Dealers, Career Agents, Direct Response, and Wirehouse). The independent agent acts as a middleman to connect insurance buyers and sellers to facilitate a transaction.
The bifurcation of index annuity based on distribution channel is also provided in the report namely Independent Agents, Banks, Captive Agents, and Broker/Dealers. Independent agents held a share of approximately 65% in the index annuity market.
Variable annuities are also segmented based on distribution channels (Independent Broker-Dealers, Captive Agents, Banks, Regional Broker-Dealers, Wirehouse, and Direct Response). Independent broker-dealers held a major share of 45% in the market as eased uncertainty on the DOL fiduciary rule has lifted sales through independent broker-dealers in recent years.
By Contract Type: The report further provided the segmentation based on the contract type of variable annuity: GMWB, Buffer Annuity Contracts, L-Share Contracts, and Others. Buffer variable annuity is expected to grow at the highest CAGR of 9.2%. Buffer annuities are a hybrid between variable annuities and fixed annuities as they allow policyholders to participate in part of the upside in the market, with partial downside protection. Therefore, the importance of buffer annuities is increasing significantly in the market.
Asset Under Management by Investment Category: The report provides insight into the variable annuity asset under management (AUM). The AUM is categorized based on the investment category (Equity/Balanced, Fixed Income, and Money Market). The US fixed income variable annuity asset under management is expected to grow significantly at a CAGR of 7.1% in the forthcoming years.
Market Dynamics: Growth Drivers
- Growing Older Population
- Capitalizing on Stock Market Growth
- Rising Inflation
- Annuities are Protected and Regulated
- Portfolio Diversification
- Advantages of Annuities over Stock
- Annuities’ Complexity and Liquidity Restrictions
- Low Interest Rates and Market Volatility
- High Fees and Expenses
- Growing Demand for Registered Indexed Linked Annuities (RILAs)
- Increasing Role of Technology
Key Topics Covered
1.) Executive Summary
3.) The US Market Analysis
4.) Impact of COVID-19
5.) Market Dynamics
6.) Competitive Landscape
7.) Company Profiles
- Lincoln National Corporation
- American International Group, Inc.
- Athene Holding Ltd.
- KKR & Co. Inc. (Global Atlantic Financial Group Ltd.)
- American National Group, Inc.
- Jackson Financial Inc. (Jackson National Life Insurance Company)
- Pacific LifeCorp
- Midland National Life Insurance Company
- Nationwide Mutual Insurance Company
- American Equity Investment Life Holding Company (American Equity Investment Life Insurance Company)
The “The US Annuity Market: Analysis By Type, By Distribution Channel, By Contract Type, By Investment Category, By Asset Under Management, By Annuity Premium Size and Trends with Impact of COVID-19 and Forecast up to 2022” report has been added to ResearchAndMarkets.com‘s offering.