Variable annuity sales reached a new record high in the 2nd quarter of 2006, with new sales of $40.8 billion, 8.5% over 1st quarter new sales of $37.6 billion, which was itself a high water mark. Year-to-date new sales of $78.5 billion represents a 22% gain over mid-year 2005 sales, putting the industry on track to exceed $150 billion in annual sales this year.
Compared to 2005 year-to-date sales, the top 5 companies by percentage change in year-to-date 2006 sales were Fidelity with a 192% increase; Genworth Financial, up 64%; Pacific Life, higher by 57%; Jackson National up 52%; and John Hancock with a 50% increase in new sales.
The combination of a 12% gain in sales volume and the acquisition of Travelers moved MetLife into the top spot for both the 2nd quarter and the year-to-date period, ahead of second ranked TIAA-CREF. Pacific Life had the largest jump in ranking, moving from number 10 in the prior year-to-date period to the number 6 slot at the midpoint of 2006.
The top 5 non-group contracts continue to be a stable bunch. In the year-to-date period ending June 30, the top selling non-group variable annuity was John Hancock’s Venture III, an L-share (3-year surrender charge) product that offers a “for life” guaranteed minimum withdrawal benefit, with $3.1 billion in new sales and 3.9% market share. Behind the Venture III contract were the Retirement Advisor Advantage Plus from RiverSource Annuities (Ameriprise), with $2.6 billion in new sales and a 3.4% share; Jackson National’s Perspective II, with $2.2 billion and a 2.9% share of the VA market; Pacific Life’s Innovations Select at $2.2 billion with a 2.8% share; and AXA Equitable’s Accumulator Elite 2004 variable annuity with $1.9 billion in new sales and a market share of 2.4%.
Industry assets are up 5.4% as of June 30, increasing to $1,263.2 billion from $1,198.4 billion as of the end of 2005. On a quarter over quarter basis, assets are up just 0.2% from $1,260.6 billion on March 31, 2006. Industry assets continue to concentrate in equities, particularly large capitalization domestic equities. As of June 30, 60% of VA assets were concentrated in large cap sub-accounts and the general accounts of the insurers, at 39.1% and 20.9% respectively.
Investment in allocation investment options–a category that includes the fund of fund sub-accounts often required when electing certain living benefit options–continued to increase. At the end of 2005, allocation sub-accounts had an 8.8% share of total assets, vs. a 9.4% share as of the end of June. The share of assets in these investment types can be expected to continue to grow rapidly as living benefit guarantees continue to appeal to growing numbers of investors in or near retirement.