New sales of variable annuities recovered modestly in the second quarter, increasing 4.3% to $31.2 billion from a multi-year low of $30 billion in the first quarter of 2009. However, sales were still down 24% from second quarter 2008 sales of $41.1 billion.
The improvement was far from broad-based, with some companies showing large declines from the first quarter, while others posted significant increases. Some companies, such as Phoenix, with an 82% drop in sales, show signs of all but exiting the business. Larger companies such as ING (down 39%) and AXA Equitable (down 37%) are suffering large drops due to the closing or substantial modification of their living benefit guarantees.
Allianz (down 55%) was also a major decliner, but largely as a result of falling back from dramatically elevated first quarter sales driven by advisors scrambling to close business prior to the termination of popular guarantees.
Big gainers included Ohio National (up 101%), Guardian (up 99%), Prudential (up 60%), and New York Life (up 54%). Ohio National continues to offer an accumulation benefit; Guardian and Prudential have not closed their lifetime withdrawal benefits; and New York Life offers an accumulation benefit and has been busy touting its financial strength.
Assets under management also saw the first increase in several quarters, gaining 11.3% to $1.187 billion from $1.067 billion in the first quarter. The increase in total assets was driven in large part by positive returns in U.S. equities, with the S&P 500 index increasing by 15.2% over the same period.
Assets in fixed accounts increased by 0.7% after dropping 2% in the first quarter, while money market assets fell 9.6%, in their second straight quarterly drop. Money market assets slid 6.2% in the first quarter after a dramatic 21.1% increase in the fourth quarter of 2008. Assets in the large cap blend category, where nearly a quarter of separate account assets are invested, grew by 19.4% in the second quarter, indicating positive flows in addition to market gains.
Overall, assets and flow data in the quarter indicate an increasing appetite for the riskier asset classes.
MetLife again led the industry in sales in the 2nd quarter with a 14.4% market share, followed closely by TIAA-CREF (11.5%), Prudential (10.8%), Jackson National (7.2%), and Lincoln National (6.1%).