New sales of variable annuities reached $34 billion in the fourth quarter of 2005, a 2% increase over third quarter sales of $33.3 billion. The increase helped push total new sales to $131.7 billion, just above the high-end estimate of $131.6 billion in the December sales report and approximately 2.5% higher than 2004 new sales of $128.5 billion.
Aggregate assets under management in variable annuities also reached a new high thanks to positive market returns in the fourth quarter, totaling just over $1.2 trillion as of Dec. 31, 2005, a new high for the industry.
While sales and asset totals reach new highs, however, net flows continue to disappoint. Net flow based on survey results from more than 70% of the industry totaled just $5.8 billion in the fourth quarter of 2005, with 2005 total net cash flow ending up at $18.9 billion, less than half the $40.2 billion in positive net cash flow in 2004.
Among Top 25 companies, the leaders in year-over-year market share gain were John Hancock, 4.6% to 6%; Prudential/American Skandia, 4.5% to 5.4%; Ameriprise Financial, 3.4% to 4.6%; Jackson National, 2.8% to 3.6%; and Ohio National, 0.5% to 0.7%.
Outside of 403(b), the leaders in each distribution channel in 2005 were Hartford Life in the bank channel with a 25.8% share; MetLife in wirehouse sales with 17.0%; Lincoln National in the regional channel with 20.4%; Prudential/American Skandia with 11.4% of independent financial planner sales; and Ameriprise in the captive agency channel with a share of 12.2%.
There was very little year-over-year change in industry sales across distribution channels. The independent planner channel had 31% of sales in both years. Wirehouse and regional both ended up with a 10% share of industry sales in 2005, with wirehouse dropping from 11% and regional increasing from 9%. The bank channel’s share of sales dropped from 14% to 13%, while captive agency increased to 35% from 34%. Direct sales held steady at 1% of total industry sales.
Share class sales breakdowns displayed a bit more movement. L-share sales increased to 18.8% of total sales in 2005 from 16.4% in 2004, while C-share sales continued to fall, down to 3.5% of total sales in 2005 from 4.3% in 2004. Sales of B-share products without bonus options fell to 27% from 30.8%, while sales of VA products with included or optional bonus features fell to 25.9% from 27%.