Third-Quarter VA Sales Up 7.8% Over Last Year To $27.7 Billion
Third-quarter new variable annuity sales of $27.7 billion posted a 7.8% increase over last years third-quarter new sales of $25.7 billion, and were but a scant 2% lower than last quarters $28.3 billion.
Year-to-date new sales of $81.8 billion are 76.7% of last years $106.7 billion, positioning the industry to meet or exceed last years new sales, barring any significant decline in the U.S. equities market. To match last year, a fourth-quarter minimum of $24.9 billion would be needed–a plausible number considering average new sales for the past two quarters have been $28 billion.
Despite the equities markets horrendous performance in the third quarter as noted below, the fourth quarter with considerable strength. As readers of these reports have probably noted, we are now focusing on new sales versus total VA sales. New sales do not include internally exchanged VA contracts. Year-to-date internal exchanges of $2 billion–2.4% of total sales–remain at historically low levels.
The U.S. equities market ended the third quarter posting the worst quarterly losses since the 1987 crash. The month of September posted its worst performance since the Great Depression. The Dow, NASDAQ and S&P 500 all posted losses for the month of 12%, 11% and 11%, respectively. As for the third quarter, these same indices posted losses of 18%, 20% and 18%, respectively.
Entering the final quarter of the year, it appears that unless investor market sentiment makes a historic turnaround, 2002 will take its place as part of the first three-year consecutive bear market since 1941. Thats the bad news; the good news is the third quarter is over and October posted record gains, as the corporate earnings scorecard showed glimmers of improvement on the horizon.
Last quarters market action took its toll on VA industry total net assets, which settled at $753.6 billion, down 14.9% from 2001s year-end total of $885.7 billion and down 9.1% from the second quarters $829.4 billion. Historically, the highest year-end industry total net assets recorded were in 1999, at $973.5 billion. The current bear market, which began the following year, has eroded a full 22.6% of the VA industrys assets.
Each of the Top 25 VA issuers at the end of the third quarter continued to post asset losses ranging from a low of -7.3% for New York Life to a high of -35.2% for Mass Mutual.
The Top 25 VA issuers continue to control 92.3% of all VA industry total net assets, while the Top 5 control 53%, a significant number.
TIAA-CREF continues to head the third-quarter new sales leader board, while Hartford improved its year-end 2001 third-place rank to second, switching places with AIG/Sun America/VALIC. The MetLife/NEF/Gen Am/MLI enterprise moved to fourth from seventh, with Equitable rounding out the Top 5.
Six issuers have third-quarter new sales ratios that are 100% of last years total new sales. Ranked in order of highest ratio they include Allianz Life at 219.4%, Aegon/Transamerica at 131%, Phoenix Life at 117%, Jackson National at 113.8%, IDS Life at 104% and MetLife/NEF/Gen Am/MLI at 100%.
While consolidation continues to open up the leader board of Top 25 VA issuers, as noted above, consolidation of assets continues to centralize market share in a smaller number of enterprises.
While TIAA-CREF holds the top spot for total year-to-date new sales, Hartford holds the record for having more Top 25 VA contracts ranked by new sales than any other company at an impressive count of four! In the perennial Director series there is the B-share Director ranked 5th, and the L-share Director Outlook ranked 8th. The Hartford Leaders B-share ranks 14th and its sister L-share, the Hartford Leaders Outlook, ranks 20th.