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Fixed Index Annuities Gain Popularity: Offering Principal Protection and Growth Potential Amid Rising Inflation Concerns

The "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)" report has been added to's offering.

The US annuity market is poised for substantial growth, with an anticipated value of $259.97 billion by 2023, reflecting a robust Compound Annual Growth Rate (CAGR) of 4.74% during the forecast period. Annuities, long-term insurance contracts designed to provide a fixed income stream in the future, are gaining popularity as a retirement planning tool.

Market Overview:

Annuities cater to individuals seeking consistent, guaranteed retirement income, making them a suitable option for retirement planning. These financial instruments offer protection against the risk of outliving one's resources. The market is driven by various factors, including a growing older population, capitalizing on stock market growth, rising inflation concerns, and the regulatory protection and oversight that annuities provide.

Market Segmentation:

The US annuity market is segmented based on several key factors:

By Type:

  • Fixed Annuity
  • Variable Annuity

Fixed annuities, known for their principal protection and growth potential, dominate the market. Within the fixed annuity category, index annuities are expected to witness significant growth.

By Distribution Channel:

  • Independent Agents
  • Banks
  • Regional Broker-Dealers
  • Independent Broker-Dealers
  • Career Agents
  • Direct Response
  • Wirehouse

Independent agents play a crucial role in connecting insurance buyers and sellers, facilitating transactions. The distribution of index annuities is also segmented based on distribution channels, with independent agents holding the largest share.

By Contract Type (Variable Annuities):

  • GMWB
  • Buffer Annuity Contracts
  • L-Share Contracts
  • Others

Buffer variable annuities, offering partial downside protection and participation in market gains, are expected to grow at a significant CAGR.

Asset Under Management (Variable Annuities):

  • Equity/Balanced
  • Fixed Income
  • Money Market

The fixed income variable annuity asset under management (AUM) is projected to grow significantly in the coming years as insurers shift their investment portfolios to mitigate market risks.

Key Growth Drivers:

  1. Growing Older Population: The aging demographic in the US is driving the demand for annuities as retirees seek financial security during their golden years.
  2. Capitalizing on Stock Market Growth: Annuities enable individuals to benefit from stock market growth while providing downside protection, making them an attractive investment option.
  3. Rising Inflation: High inflation rates are increasing interest in annuities, especially fixed index annuities, as they offer both principal protection and potential growth to combat inflation.
  4. Annuities are Protected and Regulated: Regulatory oversight and consumer protection measures make annuities a secure investment choice.

Key Challenges:

  1. Annuities' Complexity and Liquidity Restrictions: Annuities are long-term contracts with penalties for early withdrawal, which can be perceived as complex and illiquid.
  2. Low Interest Rates and Market Volatility: Low interest rates and market volatility can affect the returns on annuities, impacting their appeal to investors.

Key Trends:

  1. Growing Demand for Registered Indexed Linked Annuities (RILAs): Indexed annuities are gaining popularity due to their potential for growth and principal protection.
  2. Increasing Role of Technology: Technology is playing a significant role in simplifying the comparison of annuity products, enhancing transparency, and expanding distribution.

The COVID-19 Impact:

The initial stage of the COVID-19 pandemic saw a decline in annuity purchases due to economic uncertainties. However, as the economy stabilized, annuities gained traction as a retirement planning tool. High inflation rates sparked interest in annuities as a hedge against inflation.

Analysis of Key Players:

The US annuity market is characterized by a concentration of major players, including 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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