Variable Annuity Sales Fell 17.8% To $113 Billion Last Year
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Total sales of variable annuities in 2001 fell to $112.8 billion, down 17.8% from 2000s record of $137.2 billion. At the same time, year-end 2001 VA industry assets of $882.9 billion were down 7.7% from $956.5 billion the year before.
New sales of $106.6 billion in 2001 were 94.5% of total flow, with internal sales last year dropping to 5.5% from 2000s level of 7%.
Mergers and acquisitions continue to play a pivotal role in furthering the consolidation of VA industry sales and assets by company. The acquisition of substantial blocks of business from well-established product lines can have a dramatic effect on market share and sales rankings.
Last years number two VA issuer ranked by new sales was AIG/SunAmerica/VALIC. Prior to the addition of the VALIC product line through the AIG acquisition of American General last August, AIG/SunAmerica ranked 11th in new VA sales in 2000. While the company occupies the number 2 position for new sales last year, in the category of assets under management it falls behind Hartford Life and TIAA-CREF, with a market share of 6.3% of total VA industry assets.
Hartfords asset base of $74 billion is 33.5% larger than that of AIG/SunAmerica/VALIC, giving it a market share of 8.4%. TIAA-CREFs assets of $250.1 billion provide it with a 28.3% share of total VA industry assets.
Average assets under management for a Top 25 VA Issuer (including TIAA-CREF) are $32.5 billion. Excluding TIAA-CREF, average assets under management for a Top 25 VA Issuer are $22.8 billion.
The Top 25 VA issuers control 92.1% of all VA total net assets and are responsible for 91.2% of all new VA industry sales.
The first back-to-back losses (in 2000 and 2001) in the equities markets in almost 30 years continued to erode industry assets under management in 2001. Twenty-four (96%) of the Top 25 VA issuers ranked by assets under management were in the negative column when compared to their 2000 year-end total net assets. This number is up from 56% in the same category from 2000 as compared to 1999.
Only one company, Pacific Life, posted a positive rate of growth on assets, up 7.3%. Interestingly, Pacific Life posted the highest total net asset percentage gain in 2000 at 14.5 %, and the firms net flow as a percentage of new sales is the highest in our database for 2001, at almost 70%. The issuers success in this difficult market is attributable to a synergistic combination of factors.
Out of the Top 25 VA contracts in 2001, 2 were L-shares, 2 were C-shares, and 21 were B-shares. Pacific Lifes Innovations Select L-share product (first introduced last year) ranked 18th, with $1.2 billion in new sales. Hartfords Director Outlook (ranked at number 22) was the other new L-share product with $1 billion in new sales.
The L-share contract, with its shortened contingent deferred sales charge period, was the hottest and most well-received product in the broker-dealer community last year. The products design and its popularity was confirmed by a panel of leading B-D executives at NAVAs Annual Marketing Conference last month.
After hitting a 14-year low in 2000, fixed/general interest account VA industry assets rose to a 22.2% share. Some companies in 2001 offered attractive alternative rates to money markets as national interest rates hit a 40-year low, and enterprising sales reps utilized the fixed accounts of C-share VAs for investor dollars.
As a safe haven, money market accounts rose to recent highs and ended the year at 4.5% of total industry assets.
While fixed/GIA accounts hit record lows in 2000, growth accounts hit a record high of 21%, but declined last year to 18.8%, as investors reallocated assets and market performance punished equities, especially large-cap growth stocks. Growth and income funds and all other equity funds’ share of total industry assets were 24% and 15.9%, respectively.
Balanced funds and all fixed income/bond funds posted respective industry shares of 7.8% and 5.4%.