Reston, VA, March 18, 2009 – NAVA, the Association for Insured Retirement Solutions, announced today fourth quarter results for the variable annuity industry. The combined net assets of U.S. variable annuities decreased 13% to $1.1 trillion, as compared to the end of the third quarter of 2008. Net assets decreased by 24.1% relative to the fourth quarter one year ago.
Variable Annuity total sales, also known as premium flows, for the fourth quarter were $33.3 billion, a 30.3% decrease from fourth quarter, 2007. Fourth quarter net sales of $3.4 billion shows a decrease of 61.5 % from the fourth quarter 2007 net flows of $8.9 billion. The mix in premiums for the fourth quarter showed 67.4% of the total sales were in qualified plans and 32.6% in non-qualified plans.
Total sales for 2008 were $154.8 billion, a 15.1% decrease from the prior year’s 12- month sales of $182.2 billion. Net sales for 2008 were $23.1 billion, or 14.9% of total sales. This reflects a 30.8% decrease in net sales as compared with last year.
The mix of net assets by asset class showed that $504 billion, or 45 % of assets, was held in equity accounts at the end of last year. This is a decrease of 43% as compared with 2007 when $889 billion, or 60% of assets, was held in equity accounts. The mix also shows that $292 billion, or 26% of assets, was held in fixed accounts, which is an increase of 14% as compared to 2007.
About Annuities – With the demographic trend of people living longer, the decline in traditional sources of retirement income (pensions and Social Security), and the responsibility of retirement funding shifting to the individual – an annuity is a critical component of a retirement plan. It is a long-term retirement investment vehicle offering a combination of insurance benefits, guaranteed lifetime income payments and tax-deferred savings. Variable annuities allow individuals to invest in a variety of underlying fixed and equity funds, and provide returns based on the performance of these funds. Only annuities protect retirement assets against market volatility and guarantee retirement income that cannot be outlived.
About NAVA - NAVA, Inc., the Association for Insured Retirement Solutions, is a nonprofit trade association located in suburban Washington D.C. NAVA provides a variety of services to the industry including educational forums, research, and conferences aimed at furthering the development and understanding of fixed and variable annuities, income annuities and variable life insurance.
WHAT IS LIFE INSURANCE AND HOW DOES IT WORK?
In simple terms when you take out life insurance you are insuring your life against when you die. In the event of your death your policy will provide your family or loved one's with a cash lump sum and also pay your funeral expenses plus any outstanding debts you may have.
You can spread out your payments out over a period of time. The amount you will need to pay for your life insurance will depend on your personal circumstances and what level of cover you decide to opt for. Factors such as age, gender and health will come into play. Obviously the higher payout will mean a larger premium payment.
There are a number of things that can drive down your insurance premium. If you are a smoker, kicking the weed is a good idea as insurers charge smokers extra for their policy than non-smokers. Also making sure you have a healthy weight and get regular exercise can also reduce your premium. It may seem strange to think about getting some life insurance when you are young but the younger and healthier you are will mean you will pay considerably lower payments than if you take out a policy when you are much older.
Although when most of us think about life insurance we associate it with only paying out when someone dies but there are many different types of policy that come under the ‘life insurance' category.
‘Protection only' or ‘term insurance' are policies that pay out only within a certain period of time. This is usually the cheapest way to provide financial protection for your family in the event of your death.
A ‘whole of life' policy lasts throughout your life so your dependants are guaranteed a payout whenever you die. Because you are certain to die while holding the policy, premiums are substantially higher than for term assurance.
Whole of life policies are often reviewable, usually after 10 years. At this point your insurance company may decide to put up your premiums or reduce the cover it offers.
There are different types of whole of life policy – some offer a set payout from the outset, others are linked to investments, and the payout will depend on performance.
Endowment, pension or other ‘life policies' will pay out in the event of a death during the term of the policy but if a person survives that term they will get a cash payout. This type of policy can be seen more as an investment that can be cashed in during your lifetime while also providing protection in the event of a death or critical illness.
Although a payout from a life insurance policy is tax free, it could form part of your estate and be liable to Inheritance Tax (IHT), which could gobble up to two-fifths (40%) of your payment. Ouch!
The simple way to avoid IHT is to place your policy 'in trust', which enables any payout to be made directly to your dependants, neatly avoiding the taxman, your estate and any Will.
It's also worth looking at mortgage life insurance that will pay off your mortgage if you die.
