Morningstar: Variable Annuity Sales Up 12% in 2011

Photo credit: Federico Stevanin Photo credit: Federico Stevanin

Despite ongoing consolidation in the variable annuity industry, sales of new VAs in 2011 rose over 2010 levels, reports Morningstar.

Based on numbers from Q4 2011, the most recent statistics available, new variable annuity sales totaled $153.4 billion last year, or 12.3% above the $136.6 billion in new VA sales booked in 2010.

Net cash flow for 2011 hit $27.7 billion, the highest level since 2007 when net cash flow reached $34 billion and well exceeding the low point of $17 billion back in 2009.

MetLife led in individual VA sales in 2011, grabbing a 21.7% share of sales. Prudential, which had held the top spot from 2009 to the first quarter of 2011, took second place with a 15.4% market share. Taking third place was Jackson National, coming in with a 13.3% share. Those three firms accounted for a combined 50.5% of all retail business in 2011, or roughly $66.2 billion in new VA sales.

The report, authored by John McCarthy, product manager, annuity solutions, highlights the exit of Hartford from the VA business, which has come on the heels of several firms either exiting or trimming their VA business in the past 24 months. “Long an annuity industry anchor, Hartford saw its sales drop from over $9 billion in 2001 to just more than $900 million in 2011,” writes McCarthy.

In the first quarter, carriers instituted 59 annuity product changes, slightly higher than the 49 logged in Q1 2011. However, that number was well below the 130 filings recorded in the fourth quarter of last year.

Morningstar notes that as interest rates remain low, carriers have pared down benefits and increased prices, while O-Share issuance continues. MetLife, which recently announced plans to scale back its VA sales, Jackson National and ING filed for the most changes in the first quarter. Making up the largest group of changes were product revisions, followed by new VA contracts filed and VA contracts that were closed to new investors.

Assets in variable annuities closed out 2011 at $1,502 billion, virtually unchanged from the year-end 2010 number of $1,504 billion. That’s slightly above 2007 pre-crisis levels, with the $1,490 billion charted in the Q3’07 the previous high.

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