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Conning: VAs Return To Profitability

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NU Online News Service, April 26, 2004, 5:34 p.m. EDT – Variable annuities returned to profitability in 2003.[@@]

Preliminary figures from Conning Research & Consulting, Hartford, show that a surge in VA earnings helped the individual annuity industry report $7 billion in profits for the year, up from a net loss of $691 million in 2002.

In 2002, the stock market slump hurt annuity industry profits by scaring off VA buyers.

“We expect strong profitability to continue in 2004,” says Stephan Christiansen, Conning’s research director.

In the long run, the aging of the baby boomers should create unprecedented opportunities for annuity sellers, Christiansen predicts.

But VA vendors will continue to face challenges, even if the stock market recovery continues, Christiansen warns.

One big challenge is 2003 tax-law changes that eliminated the tax advantages that variable annuities once had over mutual funds, Christiansen says.

Another big challenge will be finding better ways to manage the risk of stock market volatility, Christiansen says.