Variable annuities continued to show strength in the first quarter with new sales of $38.7 billion, a 23.2% increase over the year-ago quarter's total of $31.4 billion. In addition, first-quarter sales were 4.3% higher than last year's fourth-quarter sales of $37.1 billion.
Assets under management posted another all-time high of $1.56 trillion, a 3.6% increase over year-end assets of $1.5 trillion. Net cash flow also rose in the first quarter, to $5.8 billion, compared with $5.4 billion in the fourth quarter and $3.6 billion in the first quarter of 2010, increases of 7.4% and 61.1%, respectively.
The top-selling companies did not change a great deal in rank, though market share was concentrated in the top firms. Still holding the No. 1 and No. 2 spots were Prudential and MetLife, at 17.6% and 14.7%, respectively, up from 16.4% and 13.8% in the fourth quarter.
A bit less than one-third of all variable annuity sales were reported under the products of these two companies. Jackson National, the third-ranked issuer, grew its market share to 11.8% from 11.2%.
TIAA-CREF remained fourth at 8.8%, down from 9.7%; and Lincoln was fifth with 6% of the market, down slightly from 6.3%. New sales for these top five companies accounted for 58.9% of reported sales, up from 57.4% for the top five in the fourth quarter.
The distribution channel sales leaders were Prudential, which took the No. 1 spot in the bank, independent planner and wirehouse channels; MetLife, which led among regional firms; and Ameriprise, which ranked first in the captive agency channel. Rounding out the top five in each channel were Jackson National, MetLife, Nationwide and Pacific Life among bank advisors; Jackson National, MetLife, Lincoln National and Allianz among the independents; MetLife, Nationwide, Lincoln National and SunLife in the wirehouse channel; Jackson National, Lincoln Financial, Protective and Prudential among the regional firms; and MetLife, AXA, SunAmerica and Prudential in the captive agency channel.
The April sales estimate of $13.9 billion, which was 13.8% higher than last April's estimated sales of $12.2 billion, shows a positive start to the second quarter. If the early sales pace continues, second-quarter sales would exceed the $40 billion mark for the first time since 2008.
Carriers significantly bumped up their product development activity during the first quarter, reflecting an increase in product interest and competitive pressure. There were 162 product changes in the quarter, up 230% from the first quarter (49 changes), and 110% (77 changes) year-over-year.
SunLife released a new step-up method. Lincoln introduced a new long-term-care rider. Several firms released new O-share contracts that modified the fee structure to accommodate a large broker-dealer.
Step-up features were more popular, with many carriers offering 8% fixed, simple step-ups to compete with the 5% compounded products. Lifetime withdrawals are mostly age-banded, with levels for a 65-year-old typically coming in at 5%. About two-thirds of all lifetime guaranteed minimum withdrawal benefits currently available offer an age-banded withdrawal structure.
Frank O'Connor is director of insurance solutions at Morningstar.