New sales of variable annuities continued their decline in the 4th quarter of 2008, falling to $32.6 billion from 3rd quarter sales of $37.0 billion, an 11.9% drop. More alarming is the 30.2% drop from the $46.7 billion reached in the 4th quarter of 2007.
On a full-year basis, sales were down 15.3% in 2008, dropping from 2007 full-year new sales of $178.8 billion to finish the year at $151.5 billion, slightly above our third quarter forecast of $151 billion.
Assets under management (AUM) saw another precipitous drop, falling to $1,123.6 billion from September AUM of $1,295.3 billion and December 2007 AUM of $1,497.3 billion, or a 13.3% drop for the quarter and a nearly 25% year over year reduction.
Absent a recovery of the additional 22% loss in the S&P 500 since 12/31/08 (or further losses) we expect total industry assets to finish the first quarter right around the $1 trillion level, in other words dropping to 2003/early 2004 asset levels.
Not surprisingly, given the sharp drop in retail product sales in the latter half of the year, TIAA-CREF led the sales rankings for 2008, followed by MetLife, AXA Equitable, ING Group and Lincoln National. Together these top 5 companies accounted for 43% of VA sales in 2008. Prudential, John Hancock, AIG Sunamerica, Hartford, and Pacific Life were the next 5 in the rankings, respectively, with a combined 29% market share.
The top selling non-group product in 2008 was ING GoldenSelect Landmark, an L-share product with $4.09 billion in sales. While not the top selling product in any one distribution channel, it sold well in the bank channel and was ranked 2nd and 4th, respectively, in the independent and wirehouse channels.
John Hancock Venture III, also an L-share VA, ranked second in total new sales at $4.07 billion. Venture III was actually the leading product sold in the wirehouse channel in 2008 with 7.2% of sales, but its 5th place ranking in the independent channel allowed the Landmark product to edge it out of the overall number one spot.
Leaders in other channels were as follows:
–Pacific Life’s Pacific Voyages dominated the bank channel with a 5.6% market share.