Variable Annuity Sales Fell 17.8% To $113 Billion Last Year
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Total sales of variable annuities in 2001 fell to $112.8 billion, down 17.8% from 2000s record of $137.2 billion. At the same time, year-end 2001 VA industry assets of $882.9 billion were down 7.7% from $956.5 billion the year before.
New sales of $106.6 billion in 2001 were 94.5% of total flow, with internal sales last year dropping to 5.5% from 2000s level of 7%.
Mergers and acquisitions continue to play a pivotal role in furthering the consolidation of VA industry sales and assets by company. The acquisition of substantial blocks of business from well-established product lines can have a dramatic effect on market share and sales rankings.
Last years number two VA issuer ranked by new sales was AIG/SunAmerica/VALIC. Prior to the addition of the VALIC product line through the AIG acquisition of American General last August, AIG/SunAmerica ranked 11th in new VA sales in 2000. While the company occupies the number 2 position for new sales last year, in the category of assets under management it falls behind Hartford Life and TIAA-CREF, with a market share of 6.3% of total VA industry assets.
Hartfords asset base of $74 billion is 33.5% larger than that of AIG/SunAmerica/VALIC, giving it a market share of 8.4%. TIAA-CREFs assets of $250.1 billion provide it with a 28.3% share of total VA industry assets.
Average assets under management for a Top 25 VA Issuer (including TIAA-CREF) are $32.5 billion. Excluding TIAA-CREF, average assets under management for a Top 25 VA Issuer are $22.8 billion.
The Top 25 VA issuers control 92.1% of all VA total net assets and are responsible for 91.2% of all new VA industry sales.
The first back-to-back losses (in 2000 and 2001) in the equities markets in almost 30 years continued to erode industry assets under management in 2001. Twenty-four (96%) of the Top 25 VA issuers ranked by assets under management were in the negative column when compared to their 2000 year-end total net assets. This number is up from 56% in the same category from 2000 as compared to 1999.
Only one company, Pacific Life, posted a positive rate of growth on assets, up 7.3%. Interestingly, Pacific Life posted the highest total net asset percentage gain in 2000 at 14.5 %, and the firms net flow as a percentage of new sales is the highest in our database for 2001, at almost 70%. The issuers success in this difficult market is attributable to a synergistic combination of factors.
Out of the Top 25 VA contracts in 2001, 2 were L-shares, 2 were C-shares, and 21 were B-shares. Pacific Lifes Innovations Select L-share product (first introduced last year) ranked 18th, with $1.2 billion in new sales. Hartfords Director Outlook (ranked at number 22) was the other new L-share product with $1 billion in new sales.
The L-share contract, with its shortened contingent deferred sales charge period, was the hottest and most well-received product in the broker-dealer community last year. The products design and its popularity was confirmed by a panel of leading B-D executives at NAVAs Annual Marketing Conference last month.
After hitting a 14-year low in 2000, fixed/general interest account VA industry assets rose to a 22.2% share. Some companies in 2001 offered attractive alternative rates to money markets as national interest rates hit a 40-year low, and enterprising sales reps utilized the fixed accounts of C-share VAs for investor dollars.
As a safe haven, money market accounts rose to recent highs and ended the year at 4.5% of total industry assets.
While fixed/GIA accounts hit record lows in 2000, growth accounts hit a record high of 21%, but declined last year to 18.8%, as investors reallocated assets and market performance punished equities, especially large-cap growth stocks. Growth and income funds and all other equity funds' share of total industry assets were 24% and 15.9%, respectively.
Balanced funds and all fixed income/bond funds posted respective industry shares of 7.8% and 5.4%.
Sales by individual distribution channel in 2001 showed 2 of the 6 tracked were up and 4 were down. Captive agency was up 2 points to 36% and regional firms were up a point to a market share of 13%.
The Top 25 contracts from 2001 have no A-share (front load) products. Nine of the Top 25 products are primarily classified as sold in the captive agency distribution channel, nine are primarily independent NASD channel-sold products, four are regional, two are bank and one is direct. There are no products in last years Top 25 ranked by new sales that were primarily sold through the national wirehouse distribution channel.
