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Milliman Survey Says Variable Annuity Guarantees Dominate Annuity Products

SEATTLE, March 31 /PRNewswire/ -- Milliman's fourth annual Guaranteed Living Benefits (GLB) survey of leading U.S. variable annuity (VA) carriers revealed that about 96% of variable annuities offered include 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 and 2006. Such benefits continued to be popular in 2007 and during the first half of 2008 with 96% of total VA sales offering a GLB.

The purchase of GLBs by policyholders also continued to increase from 2004 to the first half of 2008. During calendar years 2004 through 2007, the average election rate of GLBs was 52%, 62%, 63% and 62%, respectively. During the first half of 2008, the comparable figure jumped up to 69%.

Various combinations of four types of GLBs are generally offered in the VA marketplace: Guaranteed Minimum Income Benefits (GMIB), Guaranteed Minimum Withdrawal Benefits (GMWB), Guaranteed Lifetime Withdrawal Benefits (GLWB) and Guaranteed Minimum Accumulation Benefits (GMAB). Election rates reported by survey participants for GLWBs from 2004 through the first half of 2008 ranged from 61% to 93%, on average, of total sales of VAs that offered a GLWB. Election rates of GMWBs have been decreasing as the popularity of GLWBs has grown and the customer often must choose between the two. The election rates of GMWBs reported by survey participants for the first half of 2008 averaged about 14% down from 25% reported for calendar year 2004. An increasing percentage of total VA sales have been offering combination GMWB/GLWBs. This design typically tracks both a GMWB and a GLWB feature for the policyholder and does not force the policyholder to elect either option on a stand-alone basis. Although the offering of combination GMWB/GLWBs has been increasing, average election rates have declined from 58% in 2005 to 37% during the first six months of 2008.

In general, the popularity of GMIBs has declined somewhat over the last few years, although a few companies have maintained strong election rates. GMIB election rates decreased, on average, from 49% in calendar year 2004 to 25% during the first six months of 2008. Average election rates of GMABs have decreased from 21% in 2004 to 10% during the first half of 2008. The portion of total VA sales in which no GLB was elected dropped from 48% during 2004 to 37 - 38% during 2005 through 2007, and to 32% during the first six months of 2007.

In addition to sales and election rates of GLBs, the survey also includes information relative to investments, exercise rates, product design issues, and pricing/hedging.

Variable annuity carriers that issue at least one type of GLB were invited to participate in the survey. Twenty-one carriers participated in the survey, which is indicative of the high level of interest in this topic in the marketplace today. Sales reported by the 21 participants represent over 41% of the VA market. Thirteen of the 21 participants were ranked in the top 20 based on new VA sales (according to Morningstar, Inc.'s The VARDS Report).

GLBs provide guarantees on VAs that would otherwise reflect equity-like risk profiles. The typical GMIB guarantees that income from a deferred VA will be no less than an amount calculated by applying specified settlement option rates to a guaranteed benefit base. Eligibility for guaranteed income payments in most GMIB designs requires that a seven to ten year waiting period be met. GMABs typically guarantee that the account value will be no less than a specified percentage (usually 100%) of the premiums paid after a designated number of years. GMWB/GLWBs guarantee a specified amount of partial withdrawals regardless of the account value performance. GMWB designs included a guarantee equal to a certain dollar amount, typically a return of premiums paid. GLWB designs guarantee withdrawals for life, rather than a certain dollar amount.

About Milliman

Milliman is among the world's largest independent actuarial and consulting firms. Founded in Seattle in 1947 as Milliman & Robertson, the company currently has 49 offices in key locations worldwide. Milliman employs over two thousand people, with a professional staff of more than a thousand qualified consultants and actuaries, including specialists ranging from clinicians to economists. The firm has consulting practices in healthcare, employee benefits, property & casualty insurance, life insurance and financial services. Milliman serves the full spectrum of business, financial, government, union, education and nonprofit organizations. For further information, visit

SOURCE Milliman, Inc.
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