New variable annuity (VA) sales rose 8.7% in the second quarter of 2010, to $33.9 billion from $31.2 billion in the first quarter, also up 8.5% from the second-quarter 2009 level of $31.3 billion. This is the highest level new quarterly sales have reached since the third quarter of 2008. New sales rose 6.6% for the year-to-date period, to $65.15 billion from $61.1 billion for the same period in 2009.

On the other hand, assets under management fell for the first time since the first quarter of 2009, due primarily to negative market returns. As of June 30, 2010, total assets in variable annuities were $1.3 billion, down 5.7% from first-quarter assets, but still 11.3% higher than the $1,185.3 billion under management in VA products as of the end of the second quarter of 2009.

Assets in fixed accounts increased by a very modest 0.3%, while assets in the equity class fell 14.6% in their second straight quarterly decline, a combination of poor performance and reallocation of assets. Meanwhile assets in the moderate allocation category, where 17% of separate account assets are invested, increased by 8% in the second quarter.

Net flow of $6.2 billion in the second quarter of 2010 was 69% higher than reported net flow of $3.6 billion in the first quarter of last year for the same reporting group. This increase is a very positive trend for the industry.

 

INDUSTRY LEADERS POST GAINS

Prudential continued to lead the way as the top seller of variable annuities with $5.3 billion in second-quarter sales and a 15.7% market share. MetLife remained in second, albeit closer, with $4.5 billion in new sales and a 13.2% share of the market. Jackson National, Lincoln Financial and AXA Equitable held steady as the remainder of the top five retail sellers with 10.9%, 6.9% and 4.9% of the market, respectively (TIAA-CREF group variable annuity sales are included in total VA sales and account for 10.5% of the total VA market). Nine of the top 10 companies posted sales gains compared with the first quarter, now accounting for 77% of total variable annuity sales.

The top-selling retail product for the third straight quarter was the Jackson National Perspective II. That option turned in an impressive $1.88 billion in sales, the highest quarterly retail sales amount reported to date. Perspective II sales were followed by the Prudential Premier Retirement VA L ($1.32 billion), Jackson National Perspective L ($1.27 billion) and Prudential Premier Retirement VA B ($1.19 billion).

Prudential introduced its new products in March as it executed a rebranding effort. As part of that undertaking, the company closed its existing series of high-selling contracts. Their immediate presence at the top underscores Prudential's strong brand recognition in the variable annuity marketplace. Prudential's position also indicates that the company enjoys a high level of loyalty to the range of benefit features in its products.

Over 82% of second-quarter retail sales occurred in products that still offer some sort of living withdrawal guarantee. This shows advisors and investors continue prefer products that can facilitate growth while providing coveted security.

 

Marco Chmura is operations manager of variable annuity data at Morningstar.