A Shifting Landscape in the Individual Annuity Market Todd Giesing - PDF document

Equity-Based Insurance Guarantees Conference Nov. 11-12, 2019 Chicago, IL A Shifting Landscape in the Individual Annuity Market Todd Giesing Teddy Panaitisor SOA Antitrust Compliance Guidelines SOA Presentation Disclaimer Sponsored by

A Shifting Landscape in the Individual Annuity Market TODD GIESING & TEDDY PANAITISOR LIMRA SECURE RETIREMENT INSTITUTE 11 NOVEMBER 2019 8:30 – 9:30 AM

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Todd Giesing Teodor (Teddy) Panaitisor Director, Annuity Research Senior Research Analyst LIMRA Secure Retirement Institute LIMRA Secure Retirement Institute 3

Unce certainty Dou Doubt Con Confusion 4

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Understanding the past

Individual Annuity Sales 2008-2019 $238- $257 $265 $239 $222 $238 $220 $230 $237 $236 $222 $204 $254 $234 $184 $142 42- $156 $158 $147 $146 $154 54 $141 $134 $128 $140 $134 $116 $105 $109 $111 $102 $107 $98 $100 $96 $95- $95 $84 $82 $80 $73 $72 $100 00 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Total Variable Fixed (EST) Source: LIMRA Secure Retirement Institute (Dollars in billions) 9

Variable Annuity (VA) Sales $1 $157.9 $1 $147.4 $1 $145.6 $1 $140.5 $1 $134.0 $95 $95 - $106.5 $9 $1 $98.2 $1 $100.2 $100 100 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 (EST) Source: LIMRA Secure Retirement Institute (Dollars in billions) 10

VA Sales Timeline Ride der pullb llbacks, Mana naged d sale les restric iction ions, & $50 GMIB, GMWB WB, & GLWB WB ride der Volatili ility y buyb ybacks ks GMAB ride ders introdu duced Funds unds $45 introdu duced Quarterly Sales (billions) $40 DOL Fidu ducia iary y Rule le Imple plement nted $35 $30 $25 “Rider “GMIB Wars” $20 Max” Tech h $15 Fina nancia ial l Bubble ubble Cris isis is $10 DOL L Fiduc ducia iary y Rule le Prop opos osed $5 $0 Source: LIMRA Secure Retirement Institute (Dollars in billions) 11

VA Sales no longer in sync with equities $80 3,000 2,800 ions) $70 2,600 llio VA Sales S&P 500 2,400 Bill les (in Bi $60 2,200 2,000 500 &P 500 $50 1,800 rly VA Sale S&P 1,600 $40 1,400 1,200 $30 rterl 1,000 uart 800 Qua $20 600 400 $10 200 $0 0 1990 91 92 93 94 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 Yea ear Source: LIMRA Secure Retirement Institute (Dollars in billions) & Oxford Economics 12

VA Sales By GLB VA employer plan sales VA sales - No GLB, either not available or elected VA sales - GLB elected $1 $158 $147 $1 $1 $146 $141 $1 $134 $1 $27 27 $95 $95 - $28 28 $25 25 $22 22 $1 $107 $22 22 $25 25 $1 $100 $98 $98 $100 $100 $24 24 $36 36 $41 41 $21 21 $44 44 $18 18 $17 $17 - $18 $18 $19 19 $36 6 - $37 37 $41 41 $41 41 $106 $1 $38 $38 $96 $96 $84 $84 $77 $77 $68 $68 $42 2 - $48 $48 $41 $41 $38 $38 $44 $44 201 011 201 012 201 013 201 014 201 015 201 016 201 017 201 018 201 019 (EST) T) Source: LIMRA Secure Retirement Institute (Dollars in billions) 13

Registered index-linked annuities (RILA) $14.5- $15.5 $1 $11.2 $9.2 9.2 $7.3 .3 $3.7 .7 $1.9 .9 201 014 201 015 201 016 201 017 201 018 201 019 9 (E (EST) Source: LIMRA Secure Retirement Institute (Dollars in billions) 14

RILAs have propped up VA growth $50 Total Variable Annuity Sales $45 Quarterly Sales (billions) VA Sales Less RILA $40 $35 $30 $25 $20 If we exclude RILA’s from VA sales, VA’s would have faced a 7 th th $15 conse nsecutive e ye year r of de decl clines es in n 2018 018! $10 $5 $0 Source: LIMRA Secure Retirement Institute (Dollars in billions) 15

Fixed indexed annuity (FIA) sales $78 - $78 $83 $83 $69.6 $53.5 $5 $59.1 $5 $55.0 $5 $39.1 $47.8 $3 $3 $33.9 $32.2 2011 2012 2011 2012 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 (EST) Source: LIMRA Secure Retirement Institute (Dollars in billions) 16

FIA sales have shifted Indexed employer plan sales Indexed sales - No GLWB, either not available or elected Indexed sales - GLWB elected $78 - $78 $83 $83 $70 $70 $59 $59 $55 $55 $54 $54 $47 - $47 $48 $48 $40 $40 $39 $39 $49 $49 $26 $26 $34 $34 $32 $32 $23 $23 $28 $28 $18 $18 $16 $16 $12 $12 $13 $13 $30 - $30 $32 $32 $28 $28 $29 $29 $29 $29 $26 $26 $22 $22 $21 $21 $18 $18 $32 $32 201 011 201 012 201 013 201 014 201 015 201 016 201 017 201 018 201 019 (EST) T) Source: LIMRA Secure Retirement Institute (Dollars in billions) 17

Market Share in 20 2011 FIA FIA - Wit ith FIA FIA - Wit ithout a GLB a a a GLB 56% 56% 42% 42% Source: LIMRA Secure Retirement Institute (Dollars in billions) 18

Market Share in 20 2018 FIA FIA - Wit ithout FIA - Wit FIA ith a a GLB a a GLB 56% 56% 42% 42% Source: LIMRA Secure Retirement Institute (Dollars in billions) 19

What is driving record FIA flows? 20

Will ill FIA IA sale les overtake VA sale les? Sort of…… 21

Total VA versus FIA sales $184.0 VA Sales FIA Sales $10 102 to to $107 107 $100.2 $76 $76 to to $25.0 $69.6 $81 $81 Source: LIMRA Secure Retirement Institute (Dollars in billions) 22

RETAIL VA versus FIA sales VA RETAIL Sales FIA RETAIL Sales $145.3 $87 $87 to to $91 $91 $81.8 $75 $75 to to $23.7 $68.4 $79 $79 Source: LIMRA Secure Retirement Institute (Dollars in billions) 23

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RETAIL VA versus FIA NEW PREMIUM VA Retail NEW PREMIUM FIA Retail NEW PREMIUM $1 $101 01.4 $6 $68.4 $6 $66.5 $3 $36.1 6.1 Source: LIMRA Secure Retirement Institute (Dollars in billions) 25

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RETAIL VA versus FIA NEW PREMIUM VA Retail New Premium FIA Retail New Premium $24.7 $1 $19.0 $18.0 $1 $7.3 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2013 2014 2015 2016 2017 2018 2019 Source: LIMRA Secure Retirement Institute (Dollars in billions) 27

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Top Ten Annuity Manufacturers – 2007 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Percent of Annuity Sales - VA Percent of Annuity Sales - FIA Source: LIMRA Secure Retirement Institute 29

Top Ten Annuity Manufacturers – Q2 2019 YTD 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Percent of Annuity Sales - VA Percent of Annuity Sales - FIA Source: LIMRA Secure Retirement Institute 30

Fixed-rate deferred (FRD) sales $47 $47 - $52 $52 $4 $45.7 $38.7 $3 $3 $34.9 $34.2 $30.8 $30.9 $24.7 $29.3 $2 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 (EST) Source: LIMRA Secure Retirement Institute (Dollars in billions) 31

Money in motion has increased for FRDs Out of Surrender Charge With Charge $47.0 $47. $43.0 $43. $8. $8.2 $35.5 $35. $8.6 $8. $33.4 $33. $29. $29.7 $28. $28.2 $9. $9.1 $27. $27.0 $26.2 $26. $10. $10.0 $24.4 $24. $12.2 $12. $5.5 $5. $11. $11.8 $4. $4.7 $10. $10.8 $38. 38.8 $34 34.4 $26 26.4 $23 23.4 $20 20.7 $19. 19.7 $17. 17.5 $16. 16.4 $16 16.2 201 011 201 012 201 013 201 014 201 015 201 016 201 017 201 018 201 019 (EST) T) Source: LIMRA Secure Retirement Institute (Dollars in billions) 32

Income annuity sales $9.7 $1 $10.0 $9.7 $9 $9 $9.2 $9.1 $9 $8.3 $8 $8 $8.3 $8.1 $8 $7 $7.7 $2.8 $2 $2.7 $2 $2.7 $2 $2.4 $2 $2.2 $2 $2 $2.3 $2.2 $2 $1.0 $1 $0.2 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 (EST) Source: LIMRA Secure Retirement Institute (Dollars in billions) 33

Key themes looking forward Regul gulator ory & Econ onom omic Env nviron onmen ent wi will hav ave e a subs bstan antial al impa pact on the e annu nuity market

Regulatory & economic environment will have the biggest impact on annuity sales over the next 5 years 41

Individual annuity sales projections $238 238 to to $23 230 0 to o $22 223 3 to o $21 216 6 to o $212 212 to to $254 $254 $247 $247 $236. $236.9 $235.7 $235. $233. $233.7 $239 $239 $233 $233 $222.1 $222. $229 229 $203.5 $203. 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Overall Individual Annuity Sales Fixed Annuity Sales Variable Annuity Sales Source: LIMRA Secure Retirement Institute (Dollars in billions) 36

On the regulatory forefront SEC C Regulation Be Best In Interest NYD YDFS Suit Suitabilit ity & Bes Best t Interest Reg egula lation for or Lif Life an and Ann Annuiti ties 37

Uncertainties moving forward DO DOL Fid iduciary Rule le 2.0 .0 Ind Individual States – Be Best In Interest / / Fid iduciary Reg egulation 38

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Interest rate risk is real for manufacturers and consumers 16.0% 16.0% 14.0% 14.0% 12.0% 12.0% 10.0% 10.0% 8.0% 6.0% 4.0% 2.0% 1.52% 0.0% 1962 1962 1967 1967 1972 1972 1977 1977 1982 1982 1987 1987 1992 1992 1997 1997 2002 2002 2007 2007 2012 2012 2017 2017 Source: U.S Treasury 40