New sales of variable annuities totaled $40.9 billion in the 1st quarter of 2008, a 12.4% decrease from 4th quarter 2007 new sales of $46.7 billion and a 1.2% increase over 1st quarter 2007 new sales of $40.4 billion.
Assets under management (AUM) as of 3/31/08 dropped 5.9% to $1,396.5 billion from 12/31/07 AUM of $1,484 billion. Assets were down less than 1% from 3/31/07 total AUM of $1,397.8. Net flow was also down in the 1st quarter, to $7.2 billion from 4th quarter 2007 net flow of $9 billion, a 20.1% decline. On a year over year basis, however, net cash flow showed significant improvement, posting a 12.3% increase relative to the 1st quarter of 2007 total of $6.4 billion.
Once again AXA Equitable held the number one spot in variable annuity sales, with $3.6 billion in total new sales for the quarter. MetLife, holder of the number one spot in the 2nd and 3rd quarters of 2007, slipped to the number 4 ranking with $3.2 billion in total new sales for the 1st quarter of 2008. The top 3 positions have become increasingly competitive in the past year, with market share of 0.1% or 0.2% often determining rank. The top 5 companies were AXA Equitable with $3.6 billion in sales and 8.8% market share, TIAA-CREF at $3.5 billion and 8.6%, ING Group of Companies (a new entrant to the top 5, historically ranking, on average, in the lower half of the top 10) at $3.5 billion at 8.5%; MetLife at $3.2 billion and 7.8%, and finally Lincoln National at $2.9 billion and market share of 7.2%.
Sales of the top 25 VAs in the first quarter of 2008, including group products, totaled $21.4 billion, representing market share of 52.3%, which was an increase. For the full year 2007 the market share of the top 25 was 48.7%. The top retail product was John Hancock’s Venture III variable annuity, with over $1.12 billion in sales and a 2.75% market share. Venture III has total base insurance charges (M&E, administrative and distribution) of 1.65% and offers enhanced death and living benefits, including “for Life” GMWB and GMAB/GMWB combination riders.
Other 1st quarter 2008 top-selling retail variable annuities were ING’s Golden Select Landmark (new sales of $1.12 billion and market share of 2.74%); RiverSource’s RAVA 4 Advantage (new sales of $1.06 billion, 2.60% market share); AXA Equitable’s Accumulator Elite 2007 ($1.03 billion, 2.52% share); and American Skandia’s Xtra Credit Six ($0.96 billion, 2.36% share). Three of the top 5 retail products are L-shares: Venture III, GoldenSelect Landmark, and Accumulator Elite 2007. The other two offer a bonus feature: RAVA 4 Advantage and Xtra Credit Six.
As of this writing, Morningstar is in the process of completing the annual process of updating the 1,200+ VA contracts in its database for the May 1 filings, including subaccount changes and updates to variable annuity contract structure and death and living benefits. While we have not yet compiled and reviewed all the changes, some interesting product development trends have emerged during this process.
For example, the linking of death and living benefits with respect to withdrawals, where election of a guaranteed minimum withdrawal benefit extends dollar-for-dollar withdrawals to the death benefit value when withdrawals are kept within the limits prescribed by the living benefit, has been incorporated into benefit structures by several companies, including MetLife, Lincoln, and Hartford.