Separate Account Transfers Reflect Markets Rebound

In 2002, he says, the company had sales that consisted of approximately $1.15 billion in separate accounts and $645 million in fixed accounts. In 2003, separate accounts totaled $2.15 billion of a $2.5 billion total, and in 2004, $3.8 billion of a $4.05 billion total, Oberholtzer says.

In general, the variable annuity business is highly influenced by investor emotion that is tied to the stock markets, he adds. “Investor sentiment is a very real thing.”

Another factor, Oberholtzer says, that affects sales is a company’s ability to provide service. “Service is huge,” he says.

American Enterprise Life Ins. Co., a unit of American Express, Minneapolis, posted $624.1 million in transfers to separate accounts in 2004, a 210% increase over $210.5 million calculated in 2003. That total was 59% over American Enterprise Life’s 2002 total of $126.6 million.

There is a focus on growing sales from outside sources and the company is working with third-party brokers to sell its variable annuities, according to Susan Austin, a company spokesperson. The growth in separate account transfers suggests a greater attraction in the variable side of the business, Austin continues.

The 25% increase in separate accounts at Prudential Insurance Co. of America, Newark, N.J., was the result of a higher level of institutional investments as well as a better market in late 2003 and 2004, says a Prudential spokesperson. In 2004, transfers to separate accounts grew to $7.05 billion up from $5.66 billion in 2003.

But the 2003 total was down 21% over 2002′s $7.19 billion. Although it is hard to forecast how clients react to markets, some clients may have kept money in a money market option and then moved it into separate account funds as the market rebounded, the spokesperson adds.

23 of the top 50 companies experienced a 20%+ growth in transfers to separate accounts in 2004