Variable annuity sales gathered steam in the second quarter. New sales of $39.4 billion drove year-to-date sales to $78.2 billion, a 19.2% increase over the $65.6 billion in first-half 2010 sales and 27.1% higher than the $61.5 billion sold during the same period in 2009.
Assets under management also reached a new peak of $1.5 billion, 19% higher than midyear 2010 assets of $1.3 billion and 32.3% higher than the $1.2 billion posted in mid-2009. Net cash flow was almost unchanged at $5.7 billion vs. $5.8 billion in the first quarter but, at $11.6 billion year to date, it showed a solid 18.4% improvement over midyear 2010 net flow of $9.8 billion, and a slight gain over first-half 2009 net flow of $11.2 billion.
Absent a significant market shock, recent volatility should continue to fuel interest in guarantees and drive sales to between $13 billion and $14 billion per month for the remainder of the year. Expect to see full-year sales reach $150 billion to $160 billion, a 9% to 16% increase over 2010.
MetLife vaulted into the No. 1 spot in the second quarter on strong sales of the Investor Series VA, which offers the GMIB Max income benefit with a 6% step-up feature, evidence of strong advisor interest in features that offer higher guaranteed increases in the benefit base. Jackson National replaced MetLife to rank No. 2 in the second quarter, with a 9.2% increase in sales on the strength of unrestricted allocation and extensive choice among benefit types.
Prudential slipped to third as its sales dropped 33.5% from the first quarter; the company's reduction of the HD Lifetime Withdrawal benefit step-up rate to 5% from 6% likely contributed to the drop-off in sales activity. The remainder of the top 10 companies held on to their first-quarter ranks, with the exception of AXA Equitable, which moved to seventh, and Nationwide, which slipped to No. 8.
Note that AXA Equitable did not report second-quarter internal sales. After these sales are reported, the firm will most likely be ranked eighth.
MetLife led the bank, wirehouse and regional channels in the second quarter. Jackson National was No. 1 in the independent channel, and Ameriprise topped competitors in the captive channel, excluding TIAA-CREF.
Rounding out the top five in each channel were Prudential, Jackson National, Nationwide and Pacific Life in the banks; MetLife, Prudential, Lincoln National and Aegon/Transamerica in the independent shops; Prudential, Nationwide, Lincoln National and Sun Life in the wirehouses; Jackson National, Lincoln Financial, Protective and Nationwide in the regional firms; and MetLife, AXA, SunAmerica/VALIC and New York Life in the captive agency channel.
Product development was brisk in the second quarter, with 44 new contracts and 30 new or updated living benefits introduced. Hartford Life, for example, re-entered the guaranteed lifetime withdrawal benefit market with the Personal Retirement Manager II product. Protective added a withdrawal benefit that offers a withdrawal percentage set at the time of election that can increase each year if the account value increases.
Frank O'Connor is director of insurance solutions at Morningstar.
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