Over Same Period Last Year
By Rick Carey
For the variable annuity industry, which posted a 4.1% gain in 2002 new sales over the previous year, positive news on the sales front continued with first quarter 2003 new sales of $29 billion. This was a 12% gain over first quarter 2002 new sales of $25.9 billion.
This positive performance is being driven this year by a slightly different set of circumstances than was the case last year at this time. In 2002, sales were primarily focused on the insurance and liquidity features of the product–most notably the guaranteed death, income and withdrawal features–as the equities markets continued their free fall.
In 2003, the focus is on income and account buildup, as the talk of deflation escalates and Treasury yields hit a 45-year low. Interest rate spread compression has taken its toll on the availability of new fixed annuity offerings, enhancing the opportunity for VA issuers to market competitive rates in their fixed/general interest accounts.
Renewed interest in the account buildup features available through bonus income payments has also had a significant impact on increasing sales. As a percentage of total sales, sales of bonus products have risen during the current bear market, from a low of 28% at the end of the first quarter 2000 to a high of 35% at the end of this years first quarter. Top-performing contracts from the first quarter are highlighted below.
VA industry total net assets held the line during the first quarter, posting a negligible decline of .09% to $796.1 billion from year-end 2002 total net assets of $796.8 billion. This is a substantial improvement from fourth quarter 2002, which posted a 10.9% loss compared to fourth quarter 2001.
For the Top 25 issuers ranked by assets under management, eight (32%) posted asset growth for the period. Of this group, Hartford had the largest asset growth of $1.6 billion, a 2.6% increase from the previous reporting period. Hartford was followed by the MetLife/NEF/Gen Am/MLI enterprise with a $1.4 billion increase in assets under management. Equitable rounded out the group of three issuers who posted first quarter increases of more than $1 billion, with a $1.1 billion growth of assets.
The other five issuers posted asset growth between a low of $181 million to a high of $678 million. Of the 17 issuers with asset declines, losses ranged from a low of $59 million to a high of $1.2 billion.
The Top 10 and 25 issuers control 69.8% and 92.5% of total VA industry assets respectively. These market shares have remained virtually unchanged over the past year.
Equity-based assets declined by 2.33% last quarter, to 45.62% of total industry assets compared to year-end 2002. Fixed/bond fund assets rose by .93% during the first quarter to 11.11% of total assets. Money market assets remained unchanged at 4.89% while balanced/asset allocation declined to 7.42% of industry assets from 7.47% during the same comparative period. General interest account assets continued to rise to a share of 30.96%, up 1.45% from year-end 2002 assets. This year we could very well see this category exceed its all-time high of 34.71% at Dec. 31, 1995.
Over half (56%) of the Top 25 VA issuers are on track to meet or exceed last years new sales. These firms held first quarter new sales ratios of 25% or higher. Firms with very strong new sales ratios (30% or higher), ranked by new sales, include Hartford Life (33.2%), Equitable (37%), MetLife/NEF/Gen Am/MLI (34.2%), Nationwide (30.8%), Jackson National (34.7%), Allianz (30.7%), Guardian (126.7%), Thrivent Financial for Lutherans (38%) and Ohio National (42.2%).
Market shares for the Top 10 and Top 25 VA issuers ranked by new sales rose during the first quarter when compared to year-end 2002. Market share for the Top 10 rose to 68% from 62% and for the Top 25 market share rose to 94% from 92%. These increases, if maintained through the year, point to continued industry consolidation. Hartford, for example, has five VA contracts in the Top 25, Equitable has four, MetLife/NEF/GenAm/MLI has three, and AEGON/Transamerica and Nationwide each have two.
Of the Top 25 VA contracts, 21 (84%) had new sales ratios of 25% or higher, placing them on track to meet or exceed last years new sales volumes. Eight of these contracts had extraordinarily strong sales with ratios of 45% or higher. Ranked in order of new sales volume they include the Equitable Accumulator Plus 2002 (66%), the Hartford Leaders Outlook (46.6%), the Jackson National Perspective II (50.3%), the Equitable Accumulator 2002 (50.8%), the Guardian C+C (498.6%), the MetLife Investors VA Class L (102.9%), the Equitable Accumulator Elite 2002 (75.9%), and the Nationwide BOA-All American (86.7%).