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The US Annuity Market (by Type, Distribution Channel, Contract Type, Investment Category, Asset Under Management, & Annuity Premium): Insights and Forecast with Potential Impact of COVID-19 (2022-2026)

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    Report

  • 136 Pages
  • October 2023
  • Region: United States
  • Koncept Analytics
  • ID: 5891845
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An annuity is a type of insurance contract that is issued and distributed by financial institutions with the goal of paying out invested funds in the future in the form of a fixed income stream. Annuities are purchased or invested in by investors who receive monthly or lump-sum payments. Annuities are mostly used for retirement planning, and they assist individuals in mitigating the danger of outliving their resources.

Annuities are suitable for those seeking consistent, guaranteed retirement income. Because invested funds is illiquid and susceptible to withdrawal penalties, this financial instrument is not suggested for younger people or those who require liquidity. Investors concerned about rising market volatility and rising prices pushed overall US annuity purchases to their highest level since 2008. Insurers, on the other hand, are providing clients higher payments and guarantees on all types of annuities in the face of rising interest rates, which has resulted in an increase in earnings for insurance firms in recent years. The US annuity market value is expected to reach US$259.97 billion in 2023, growing at a CAGR of 4.74% during the forecast period.

Segment Covered

By Type: On the basis of type, the report offers the bifurcation of the US annuity market into two segments: Fixed Annuity and Variable Annuity. The fixed annuity accounted for the maximum share 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: In terms of distribution channel, fixed annuities are segmented into 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 the largest share 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 highest share 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 splits the market 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. 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 Catergory: The report also 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 at a significant CAGR in the forthcoming years. As part of the risk management practices, the majority of insurers have implemented more stringent asset allocation requirements, with many setting caps on equities and mandating investments in volatility-managed sub-accounts. Since allocations to fixed income help mitigate the downside in AUM in case of a market decline, many insurance companies are expected to shift their investment portfolio to fixed income from the equity market.

Top Impacting Factors

Growth Drivers

  • Growing Older Population
  • Capitalizing on Stock Market Growth
  • Rising Inflation
  • Annuities are Protected and Regulated

Challenges

  • Annuities’ Complexity and Liquidity Restrictions
  • Low Interest Rates and Market Volatility

Trends

  • Growing Demand for Registered Indexed Linked Annuities (RILAs)
  • Increasing Role of Technology

Driver: Rising Inflation

As inflation continues at a rapid pace, many people worry about whether their retirement years would be financially secure. High inflation sparks interest in annuities, especially for accumulation-focused fixed index annuity products that provide principal protection combined with greater investment growth. According to SRI Annuity Research, fixed-rate deferred annuities provide about three times the return of certificates of deposit (CDs) on average, making them very beneficial to investors looking for growth that can offset high rates of inflation. Therefore, high inflation has resulted in the growth in the annuity market in the US over the past few years.

Challenge: Annuities’ Complexity and Liquidity Restrictions

Annuities are long-term contracts (3 to 20 years in length), and like most contracts, penalties are attached if the annuitant breaks the contract. On the other hand, some annuities do not provide enough growth potential. Limited growth means the retirement plan does not grow fast enough and has less money when the annuitant retires. Moreover, annuities offer a lifetime income. However, not all annuities offer inflation-adjusted income. If annuitants start the lifetime income too early, they might not be able to keep up with the cost of living, and they would not have enough money in later years. So before investing in an annuity, people need to weigh all of these factors and decide if an annuity is suitable or not. Therefore, the complexity of annuities makes them less attractive and hence affects the market growth.

Trend: Increasing Role of Technology

Technology is shaping the annuity market. Annuity agents and advisors don’t have the time to educate everyone about the many details of annuities. But annuities must get into the right hands to help Americans avoid outliving their retirement savings. Secondly, technology can make it much simpler to compare annuities from different providers. It can be time-consuming calling providers to get quotes for the detailed annuity that you are interested in, but an online platform to compare pricing and options would make it easier for everyone to get multiple annuity quotes. Third of all, many people have called for more transparency in the annuity industry. Consumers benefit in every way, including more education, a better way to compare products, and improved suitability. Technology also helps agents and advisors find new clients and add more value to their business. The integration of data governance, edge computing, artificial intelligence (AI), machine learning (ML), and blockchain in the annuity industry would further benefit the market growth in the coming years.

The COVID-19 Analysis

While the social and medical consequences of COVID-19 have been significant, the shock to the economy and markets had a significant impact on annuity companies. Interest rates and equity markets had declined, credit spreads had widened, and implied volatilities had increased in the year 2020. Each of these movements affects fixed income and equity investments (for example, credit spreads had widened and the creditworthiness of counterparties had affected), as well as the annuity products insurers sell, creating the balance sheet and earnings volatility. In conclusion, in the initial period of the pandemic, the consumers faced increasing temporary or permanent unemployment, loss of income, and general market volatility. This led to a decline in the appetite for purchasing new annuity products. However, as the economy recovers and consumer behavior begins to stabilize, the pandemic highlight the value of these products and the sales increased in the following year.

Analysis of Key Players

The US annuity market is concentrated with few players holding the significant share in the market. The key players in the US annuity market are American International Group, Inc., Lincoln National Corporation, Athene Holding Ltd., MassMutual, American National Group, Inc., Jackson Financial Inc. (Jackson National Life Insurance Company), KKR & Co. Inc. (Global Atlantic Financial Group Ltd.), Pacific LifeCorp, Midland National Life Insurance Company, Nationwide Mutual Insurance Company, American Equity Investment Life Holding Company (American Equity Investment Life Insurance Company), and TIAA.

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Table of Contents


1. Executive Summary
2. Introduction
2.1 Annuity:  An Overview
2.1.1 Introduction to Annuity
2.1.2 Types of Annuity
2.1.3 Features of Annuity
2.2 Annuity Segmentation:  An Overview
2.2.1 Fixed Annuity Segmentation
2.2.2 Variable Annuity Segmentation

3. The US Market Analysis
3.1 The US Annuity Market:  An Analysis
3.1.1 The US Annuity Market by Value
3.1.2 The US Annuity Market by Type (Fixed Annuity and Variable Annuity)
3.2 The US Fixed Annuity Market:  An Analysis
3.2.1 The US Fixed Annuity Market by Value
3.2.2 The US Fixed Annuity Market by Distribution Channel (Independent Agents, Banks, Regional Broker-Dealers, Independent Broker-Dealers, Career Agents, Direct Response, and Wirehouse)
3.2.3 The US Independent Agents’ Fixed Annuity Market by Value
3.2.4 The US Banks’ Fixed Annuity Market by Value
3.2.5 The US Regional Broker-Dealers’ Fixed Annuity Market by Value
3.2.6 The US Independent Broker-Dealers’ Fixed Annuity Market by Value
3.2.7 The US Career Agents’ Fixed Annuity Market by Value
3.2.8 The US Direct Response Fixed Annuity Market by Value
3.2.9 The US Wirehouse Fixed Annuity Market by Value
3.2.10 The US Fixed Annuity Market by Type (Index Annuity and Traditional Fixed Annuity)
3.2.11 The US Index Annuity Market by Value
3.2.12 The US Index Annuity Market by Distribution Channel (Independent Agents, Banks, Captive Agents, and Broker/Dealers)
3.2.13 The US Independent Agents’ Index Annuity Market by Value
3.2.14 The US Banks’ Index Annuity Market by Value
3.2.15 The US Captive Agents’ Index Annuity Market by Value
3.2.16 The US Broker/Dealers’ Index Annuity Market by Value
3.2.17 The US Traditional Fixed Annuity Market by Value
3.3 The US Variable Annuity Market:  An Analysis
3.3.1 The US Variable Annuity Market by Value
3.3.2 The US Variable Annuity Market by Contract Type (GMWB, Buffer Annuity Contracts, L-Share Contracts, and Others)
3.3.3 The US GMWB Variable Annuity Contract Market by Value
3.3.4 The US Buffer Variable Annuity Contract Market by Value
3.3.5 The US L-Share Variable Annuity Contract Market by Value
3.3.6 The US Other Variable Annuity Contract Market by Value
3.3.7 The US Variable Annuity Market by Distribution Channel (Independent Broker-Dealers, Captive Agents, Banks, Regional Broker-Dealers, Wirehouse, and Direct Response)
3.3.8 The US Independent Broker-Dealers’ Variable Annuity Market by Value
3.3.9 The US Captive Agent’ Variable Annuity Market by Value
3.3.10 The US Banks’ Variable Annuity Market by Value
3.3.11 The US Regional Broker/Dealers’ Variable Annuity Market by Value
3.3.12 The US Wirehouses Variable Annuity Market by Value
3.3.13 The US Direct Response Variable Annuity Market by Value
3.4 The US Variable Annuity Asset Under Management:  An Analysis
3.4.1 The US Variable Annuity Asset Under Management by Value
3.4.2 The US Variable Annuity Asset Under Management by Investment Category (Equity/Balanced, Fixed Income, and Money Market)
3.4.3 The US Equity/ Balanced Variable Annuity Asset Under Management by Value
3.4.4 The US Fixed Income Variable Annuity Asset Under Management by Value
3.4.5 The US Money Market Variable Annuity Asset Under Management by Value
3.5 The US Annuity Premium:  An Analysis
3.5.1 The US Annuity Premium by Value

4. Impact of COVID-19
4.1 Impact of COVID-19 on Annuity Market
4.2 Decline in Interest Rates
4.3 Post COVID-19 Impact on Annuity Market

5. Market Dynamics
5.1 Growth Drivers
5.1.1 Growing Older Population
5.1.2 Capitalizing on Stock Market Growth
5.1.3 Rising Inflation
5.1.4 Annuities are Protected and Regulated
5.1.5 Portfolio Diversification
5.1.6 Advantages of Annuities over Stock
5.2 Challenges
5.2.1 Annuities’ Complexity and Liquidity Restrictions
5.2.2 Low Interest Rates and Market Volatility
5.2.3 High Fees and Expenses
5.3 Market Trends
5.3.1 Growing Demand for Registered Indexed Linked Annuities (RILAs)
5.3.2 Increasing Role of Technology

6. Competitive Landscape
6.1 The US Variable Annuity Players by Market Share
6.2 The US Variable Annuity Players by Contracts
6.3 The US Variable Annuity Players by GMWB Contracts
6.4 The US Variable Annuity Players by GMWB/Lifetime Income Offerings
6.5 The US Variable Annuity Players by Buffer Annuity Contracts
6.6 The US Variable Annuity Players by L-Share Contracts
6.7 The US Variable Annuity Players Gross Sales through Captive Agents
6.8 The US Variable Annuity Players Gross Sales through Independent Broker-Dealers
6.9 The US Variable Annuity Players Gross Sales through Banks
6.10 The US Variable Annuity Players Gross Sales through Wirehouses
6.11 The US Variable Annuity Players Gross Sales through Regional Broker/Dealers
6.12 The US Variable Annuity Players Gross Sales through Direct Response
6.13 The US Fixed Annuity Players by Market Share
6.14 The US Index Annuity Players by Market Share
6.15 The US Variable Annuity Players’ Assets by Market Share
6.16 The US Variable Annuity Players’ Annuity Premium by Market Share

7. Company Profiles
7.1 Lincoln National Corporation
7.1.1 Business Overview
7.1.2 Operating Business Segment
7.1.3 Business Strategy
7.2 MassMutual
7.2.1 Business Overview
7.2.2 Operating Businesses
7.2.3 Business Strategy
7.3 American International Group, Inc.
7.3.1 Business Overview
7.3.2 Operating Segment
7.3.3 Business Strategy
7.4 Athene Holding Ltd.
7.4.1 Business Overview
7.4.2 Operating Segments
7.4.3 Business Strategy
7.5 KKR & Co. Inc. (Global Atlantic Financial Group Ltd.)
7.5.1 Business Overview
7.5.2 Operating Segments
7.5.3 Business Strategy
7.6 American National Group, Inc.
7.6.1 Business Overview
7.6.2 Operating Segment
7.6.3 Business Strategy
7.7 Jackson Financial Inc. (Jackson National Life Insurance Company)
7.7.1 Business Overview
7.7.2 Operating Segment
7.7.3 Business Strategy
7.8 Pacific LifeCorp
7.8.1 Business Overview
7.8.2 Business Strategy
7.9 Midland National Life Insurance Company
7.9.1 Business Overview
7.9.2 Business Strategy
7.10 Nationwide Mutual Insurance Company
7.10.1 Business Overview
7.10.2 Business Strategy
7.11 TIAA
7.11.1 Business Overview
7.11.2 Business Strategy
7.12 American Equity Investment Life Holding Company (American Equity Investment Life Insurance Company)
7.12.1 Business Overview
7.12.2 Business Strategy

List of Charts
  • Feature of Annuity
  • Fixed Annuity Segmentation
  • Variable Annuity Segmentation
  • The US Annuity Market by Value; 2017-2021 (US$ Billion)
  • The US Annuity Market by Value; 2022-2026 (US$ Billion)
  • The US Annuity Market by Type; 2021 (Percentage, %)
  • The US Fixed Annuity Market by Value; 2017-2021 (US$ Billion)
  • The US Fixed Annuity Market by Value; 2022-2026 (US$ Billion)
  • The US Fixed Annuity Market by Distribution Channel; 2021 (Percentage, %)
  • The US Independent Agents’ Fixed Annuity Market by Value; 2020-2021 (US$ Billion)
  • The US Independent Agents’ Fixed Annuity Market by Value; 2022-2026 (US$ Billion)
  • US Banks’ Fixed Annuity Market by Value; 2020-2021 (US$ Billion)
  • US Banks’ Fixed Annuity Market by Value; 2022-2026 (US$ Billion)
  • The US Regional Broker-Dealers’ Fixed Annuity Market by Value; 2020-2021 (US$ Billion)
  • The US Regional Broker-Dealers’ Fixed Annuity Market by Value; 2022-2026 (US$ Billion)
  • The US Independent Broker-Dealers’ Fixed Annuity Market by Value; 2020-2021 (US$ Billion)
  • The US Independent Broker-Dealers’ Fixed Annuity Market by Value; 2022-2026 (US$ Billion)
  • The US Career Agents’ Fixed Annuity Market by Value; 2020-2021 (US$ Billion)
  • The US Career Agents’ Fixed Annuity Market by Value; 2022-2026 (US$ Billion)
  • The US Direct Response Fixed Annuity Market by Value; 2020-2021 (US$ Billion)
  • The US Direct Response Fixed Annuity Market by Value; 2022-2026 (US$ Billion)
  • The US Wirehouse Fixed Annuity Market by Value; 2020-2021 (US$ Billion)
  • The US Wirehouse Fixed Annuity Market by Value; 2022-2026 (US$ Billion)
  • The US Fixed Annuity Market by Type; 2021 (Percentage, %)
  • The US Index Annuity Market by Value; 2017-2021 (US$ Billion)
  • The US Index Annuity Market by Value; 2022-2026 (US$ Billion)
  • The US Index Annuity Market by Distribution Channel; 2021 (Percentage, %)
  • The US Independent Agents’ Index Annuity Market by Value; 2020-2021 (US$ Billion)
  • The US Independent Agents’ Index Annuity Market by Value; 2022-2026 (US$ Billion)
  • The US Banks’ Index Annuity Market by Value; 2020-2021 (US$ Billion)
  • The US Banks’ Index Annuity Market by Value; 2022-2026 (US$ Billion)
  • The US Captive Agents’ Index Annuity Market by Value; 2020-2021 (US$ Billion)
  • The US Captive Agents’ Index Annuity Market by Value; 2022-2026 (US$ Billion)
  • The US Broker/Dealers’ Index Annuity Market by Value; 2020-2021 (US$ Billion)
  • The US Broker/Dealers’ Index Annuity Market by Value; 2022-2026 (US$ Billion)
  • The US Traditional Fixed Annuity Market by Value; 2017-2021 (US$ Billion)
  • The US Traditional Fixed Annuity Market by Value; 2022-2026 (US$ Billion)
  • The US Variable Annuity Market by Value; 2017-2021 (US$ Billion)
  • The US Variable Annuity Market by Value; 2022-2026 (US$ Billion)
  • The US Variable Annuity Market by Contract Type; 2021 (Percentage, %)
  • The US GMWB Variable Annuity Contract Market by Value; 2020-2021 (US$ Billion)
  • The US GMWB Variable Annuity Contract Market by Value; 2022-2026 (US$ Billion)
  • The US Buffer Variable Annuity Contract Market by Value; 2020-2021 (US$ Billion)
  • The US Buffer Variable Annuity Contract Market by Value; 2022-2026 (US$ Billion)
  • The US L-Share Variable Annuity Contract Market by Value; 2020-2021 (US$ Million)
  • The US L-Share Variable Annuity Contract Market by Value; 2022-2026 (US$ Million)
  • The US Other Variable Annuity Contract Market by Value; 2020-2021 (US$ Billion)
  • The US Other Variable Annuity Contract Market by Value; 2022-2026 (US$ Billion)
  • The US Variable Annuity Market by Distribution Channel; 2021 (Percentage, %)
  • The US Independent Broker-Dealers’ Variable Annuity Market by Value; 2020-2021 (US$ Billion)
  • The US Independent Broker-Dealers’ Variable Annuity Market by Value; 2022-2026 (US$ Billion)
  • The US Captive Agent’ Variable Annuity Market by Value; 2020-2021 (US$ Billion)
  • The US Captive Agent’ Variable Annuity Market by Value; 2022-2026 (US$ Billion)
  • The US Banks’ Variable Annuity Market by Value; 2020-2021 (US$ Billion)
  • The US Banks’ Variable Annuity Market by Value; 2022-2026 (US$ Billion)
  • The US Regional Broker/Dealers’ Variable Annuity Market by Value; 2020-2021 (US$ Billion)

Companies Mentioned

  • American Equity Investment Life Holding Company (American Equity Investment Life Insurance Company)
  • American International Group, Inc.
  • American National Group, Inc.
  • Athene Holding Ltd.
  • Jackson Financial Inc(Jackson National Life Insurance Company)
  • KKR & CoInc(Global Atlantic Financial Group Ltd.)
  • Lincoln National Corporation
  • MassMutual
  • Midland National Life Insurance Company
  • Nationwide Mutual Insurance Company
  • Pacific LifeCorp
  • TIAA