The variable annuity value proposition appears to be eroding, as mutual fund sales outpaced those of annuities during the second quarter, and more of the same is expected through next year.

Data released this month by Kehrer-Limra shows mutual fund sales up 55.9%, to $10.6 billion, in the quarter compared with the previous one. Meanwhile, variable annuity sales rose 17%, to $10.3 billion. Variable annuity sales were down 19.5% from a year earlier, and mutual funds sales were down 31.2%, according to the Princeton, N.J., research firm.

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