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VA Issuers May Shrug Off Market-Timing Probes: UBS

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NU Online News Service, March 11, 2004, 2:07 p.m. EST – Variable annuity issuers might escape serious market-timing charges.[@@]

Andrew Kligerman, a securities analyst with UBS Securities L.L.C., New York, gives that assessment in a new research note.

Some VA issuers continue to face probes by the U.S. Securities and Exchange Commission, Kligerman writes.

“We suspect that regulators will find cases of VA market timing, particularly within older contracts that permit greater subaccount transfer flexibility,” Kligerman says. “However, the likelihood of VA writers incurring material market-timing fines/restitutions seems low.”

Regulators have accused some mutual fund managers of letting favored clients time the market by trading after markets closed. But internal controls and a lack of quid-pro-quo incentives in the VA industry probably minimized VA market timing, Kligerman writes.

Kligerman expects to see strong long-term growth in VA sales.

VA sales grew 11%, to $125 billion, in 2003, and the appeal of principal guarantees could help VA sales grow 8% to 12% per year over the next few years, Kligerman writes.