Living Benefits

Living benefits or guaranteed living benefits (GLB) are optional guarantees that can be embedded into variable annuity products. In the past, variable annuities could come with a guaranteed minimum death benefit (GMDB) which paid a minimum benefit upon death of the annuitant. Over the past decade, however, product development and innovation have flourished, and insurers offer income, accumulation, or withdrawal guarantees that can provide a significant measure of protection against market risk while the annuitant is alive. Some of these “living benefits” include: guaranteed minimum income benefit (GMIB); guaranteed minimum withdrawal benefit (GMWB); guaranteed lifetime withdrawal benefit (GLWB), and; guaranteed minimum accumulation benefit (GMAB). Living benefits have proven to be incredibly popular. More than 95% of variable annuity sales in 2007 contained some form of living benefit. Guaranteed lifetime withdrawal benefits (GLWB) have proven to be one of the most popular guarantees.

Large Declines in Variable Annuity Sales Seen While Fixed Annuity Sales Surge

Sales of variable annuity products in the United States cratered 27% during the first quarter of 2009. First quarter sales were $30.7 billion compared to $40.9 billion during the first three months of 2008. At the same time, sales of fixed annuities surged 74% to $35.6 billion. This is the first time since 1995 that sales of fixed annuities have exceeded sales of variable annuities for two straight quarters. This sales dynamic is not surprising and is largely a reaction to the market volatility...

Variable Annuities are Starting to Lose Appeal

Variable annuity sales had been surging prior to the onset of the financial crisis. As reported earlier , many customers who had purchased variable annuities with guaranteed living benefits (GLBs) two or more years ago have been well insulated from the financial storm. However, the current environment for variable annuities and living benefits is vastly different than it was even a year ago. Insurers are now increasing prices and scaling back on the richness of product features, making it a...

Buffett Blasts Life Insurers for Taking on Crazy Risks with Variable Annuity Guarantees

Credit risk and the general health of...

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Consider Annuities to "Build a Pension and Salvage Your Nest Egg"

An in depth and very worthwhile article in the Wall Street Journal discusses annuities in the context of the financial crisis. Surging demand for annuities--particularly fixed--is a natural reaction to the volatility and pain experienced over the past couple of years. That said, would-be buyers need to inform themselves and consider the pros and cons associated with the entire landscape of options. Topics addressed in the article include: 1) The notion of creating a personal pension 2) Annuity...

The Vast Majority of Variable Annuities Sold in 2008 Include Some Form of Guaranteed Living Benefit (GLB)

Guaranteed living benefits ( GLB ) are optional guarantees that can be embedded into variable annuity products. A recent variable annuity survey from the actuarial and consulting firm Milliman indicates that GLBs have experienced rapid growth consumer adoption over the past several years. 96% of variable annuity sales in 2007 and the first half of 2008 included some form of GLB. "Sales of VAs that offered a GLB during calendar year 2004 averaged 87% of total VA sales, increasing to 95% in 2005...
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