NU Online News Service, March 28, 5:29 p.m. – Estimated net sales of variable annuities plunged 75%, to $7.5 billion in 2001, from $29.5 billion in 2000, reports the Financial Research Corp., Boston, a subsidiary of the BISYS Group Inc., New York.

Last year was the fifth straight year of falling annual net sales for VA products, FRC says. The firm estimates net inflows to VAs were $47.7 billion in 1997, $40.3 billion in 1998 and $38 billion in 1999.

FRC says fourth quarter 2001 saw the first net outflow from VAs since it began tracking the data in 1995. During the quarter, VA outflows exceeded inflows by an estimated $1.3 billion.

Redemptions and tax-free 1035 exchanges between VAs had a big effect on net sales last year. FRC estimates that 61% of gross VA sales last year were derived from 1035 exchanges, up from 52% in 2000 and 20% in 1996.

FRC’s latest Variable Annuity Market Analyst notes several other VA industry trends:

  • About 40% of VA providers saw net redemptions last year, up from 35% for 2000 and 15% for 1999. In the fourth quarter, 65% reported VA outflows exceeded inflows.
  • The two top-selling broad types of VAs, bond and money market, experienced a sharp turnaround from a year earlier. Bond-based VAs gathered an estimated $9.7 billion, up from a net outflow of $1.8 billion in 2000, while money-market VAs had a net inflow of $7 billion, compared to a net outflow of $3 billion a year earlier.
  • Value sub-accounts netted inflows estimated at $6.5 billion during 2001, reversing a net outflow of $2.9 billion the previous year.