Guaranteed life benefits were included in about 96% of variable annuities sold last year, an increase from the 87% that provided the benefit in 2004, a new survey finds.

Guaranteed life benefits were included in 95% of total variable annuities sold in 2005 and 2006, according to Milliman’s fourth annual Guaranteed Living Benefits (GLB) survey of U.S. variable annuity carriers.

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%.

Researchers found that various combinations of four types of GLBs are generally offered in the VA marketplace: guaranteed minimum income benefits, guaranteed minimum withdrawal benefits, guaranteed lifetime withdrawal benefits (GLWB) and guaranteed minimum accumulation benefits.

Election rates reported by survey participants for guaranteed lifetime withdrawal benefits from 2004 through the first half of 2008 ranged from 61% to 93%, on average, of total sales of variable annuities that offered a GLWB.

Election rates of guaranteed minimum withdrawal benefits have been decreasing as the popularity of guaranteed lifetime withdrawal benefits has grown; customers often must choose between the two options, researchers found.

The election rates of guaranteed minimum withdrawal benefits 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 variable annuity sales have included the combination of guaranteed minimum withdrawal and guaranteed lifetime withdrawal benefits. This design typically tracks both for the policyholder and does not force the policyholder to elect either option on a stand-alone basis. Although the offering of combination of these two benefits has been increasing, average election rates have declined from 58% in 2005, to 37% during the first six months of 2008, according to the survey.

In general, the popularity of guaranteed minimum income benefits (GMIB) 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 guaranteed minimum accumulation benefits have decreased from 21% in 2004 to 10% during the first half of 2008.

Variable annuity carriers that issue at least one type of GLB were invited to participate in the survey. Twenty-one carriers participated, with sales reported by participants representing more than 41% of the variable annuity market. Thirteen of the 21 participants were ranked in the top 20 Morningstar rankings, based on new variable annuity sales.